The Downfall of Nation States | Rana Dasgupta | TMR

The nation-state, as the dominant form of political organization, is a surprisingly recent phenomenon. In 1900, there were approximately 50 sovereign states; today, there are 193 UN members. This quadrupling occurred in two major waves: the decolonization following the end of European empires and the breakup of the Soviet Union after 1989. This rapid expansion means the global mosaic of sovereign nation-states is a very new development.

In 1900, there were somewhere around 50 sovereign states... compared to 193 seats in the UN today... The number of sovereign territories has pretty much quadrupled in that time. One was the end of the European empires which produced about a hundred new countries. And then there was another big wave after 1989 when a lot of states were made independent from the Soviet Union.

The origins of the nation-state are deeply intertwined with theological authority. Early states, like 13th-century France, sought to establish mystical, theological authority by symbolically 'borrowing God' for their specific territory. This foundational act inherently led to an exclusionary identity, defining who belonged and who was the 'foreigner' or 'suspect citizen' (e.g., Jews in European states), a mechanism for whipping up violence against those without legitimate citizenship claims.

If you look back at the long history of the nation state, theology has always played a very important part... the king of France in the 13th century bought the crown of thorns... literally taking the crown of heaven and putting it on the king of France's head... thereby giving France a mystical theological authority... Exclusion was also there at the heart of this the identity of the state that not everybody can be a member of this state.

Britain, as the first capitalist superpower, saw its global expansion primarily driven not by the government, but by a joint-stock corporation: the East India Company. This company possessed its own armies, navies, and ambassadors, governing vast territories like India. By the 18th century, the British state was 'totally mortgaged' to the company, with 25% of MPs being stockholders. The country's financial system was underwritten by company profits and share value, demonstrating a historical instance where a corporation's interests superseded state policy, even leading to American independence when Parliament chose to bail out the company over preserving its American colony.

In the early stages it was not the British government but a joint stock corporation the East India Company that primarily drove this... by the 18th century the British state is totally mortgaged to the East India Company. 25% of all MPs were stockholders... the country itself its entire financial system was underwritten both by East India Company profits and East India Company share value... the state would risk its American colony rather than allow the company to go bankrupt.

After World War II, with 50% of global industrial capacity and Europe largely destroyed, the U.S. designed a new global order. This 'American empire' involved dismantling European empires and establishing a system of sovereign states that would trade within a global capitalist framework, from which America would derive immense profits. The U.S. provided hegemonic services (stable currency, free trade, open seas) and administered the system through organizations like the World Bank, IMF, and UN, while uniquely exempting itself from international laws it imposed on others.

America enters the postwar period with something like 50% of global industrial capacity... The world it wants is a new kind of empire... requiring the dismantling of the European empires and the breaking up of the world into a set of sovereign states all of which will trade with each other in a global capitalist system from which America will draw immense rents and profits... America's always played an exceptional had an exceptional position in it. Setting international laws that it alone did not have to abide by.

There is an unfortunate correlation between the peak of Western democracy and equality and the peak of global inequality. According to Branko Milanović's work, the wealth divergence between the West and the rest of the world, which accelerated under European empires, continued and peaked around 1974. This suggests that the 'best in the West'—democracy, equality, public services—flourished precisely when the West was most affluent relative to the rest of the world, implying a systemic link between internal prosperity and external extraction.

The line of divergence in wealth between different regions of the world did not stop in 1945. Its peak was actually in 1974. So there is unfortunately a correlation between everything we think of as best in the west meaning democracy and equality... those things hit their peak precisely at the moment when the world was most unequal and the west was the gap in wealth was the greatest.

The offshoring of industrial production and the rise of an AI-driven economy have diminished the strategic importance of human labor in Western countries. Historically, Western states granted democracy and social welfare (education, healthcare) to citizens because they were valuable industrial workers, ensuring stability and a stake in the system. Now, with labor's declining value and increased competition with Asia, this social contract is eroding, leading to a more oligarchic economic structure and a 'withdrawal' of democracy in various subtle ways.

The offshoring of America's industrial production and then later on a sort of move to an AI economy where human labor becomes less and less important... a major reason why all the western countries granted democracy to citizens... they conceded it because finally those citizens were very very valuable to them as industrial workers... now, all those things are under pressure... democracy is under threat and is even being withdrawn in various devious ways.

Silicon Valley's tech industry now plays a role analogous to the East India Company, serving as a critical asset to American power by driving technological advancement and generating immense wealth. However, these firms also compete with state power; they outspend the government on scientific research, accumulate vast global data, and exert disproportionate political influence. Their monopolistic nature makes traditional antitrust regulation ineffective, and their immense political energy is devoted to avoiding regulation. These companies are becoming geopolitical actors with their own ideas about political and economic organization, capable of influencing elections and potentially holding states to ransom.

Silicon Valley is performing a similar role for America today... spends much much more money than the US government on scientific research... producing most of the technological edge that America has but also a lot of the dollar inflow... Silicon Valley is this enormous asset to American power... they don't necessarily contribute to state power in the same way. They compete with it... Silicon Valley is able to basically hijack American democracy, automate a lot of opinion, produce enormous confusion... It's almost in the nature of Silicon Valley to to create monopolies... they will only have more be able to extract more and more concessions from states in the future.