The fundamental choice for every market-state is whether to be (1) a mercantile state—i.e., one that endeavors to improve its relative position vis-à-vis all other states by competitive means, or (2) an entrepreneurial state, one that attempts to improve its absolute position while mitigating the competitive values of the market through cooperative means, or (3) a managerial market-state, one that tries to maximize its position both absolutely and relatively by regional, formal means (trading blocs, etc.). This choice will have both constitutional and strategic implications.
The mercantile state seeks market share above all else, in order to gain relative dominance in the international market; the entrepreneurial state seeks leadership through the production of collective goods that the world's states want; the managerial state seeks power through its hegemony within a regional economic zone. One is not more moral or necessarily more benign than another. There are pitfalls in each position: the entrepreneurial state may be tempted to abdicate its leadership and initiative out of mingled pique and national self-absorption, as the American nation-state did after World War I; the managerial state always risks the dilution of responsibility that goes with cooperative systems—by just such means did the society of nation-states watch as genocidal campaigns proceeded in Libya, in Rwanda, in Cambodia, in Bosnia, in the Sudan; the mercantile state risks retributive reactions of the kind practiced by nation-states that so greatly worsened the depression of the 1930s. The entrepreneurial state may become so intoxicated with its own absolute position that it fails to prepare itself—by not deferring consumption in order to invest in infrastructure—for relative challenges from states whose competitive drive is masked by the improved wealth positions of all major players; by just such developments have great states routinely been displaced by hungrier antagonists. The mercantile state is subject to an analogous fate, however; Paul Kennedy's The Rise and Fall of the Great Powers is largely devoted to documenting the fall of mercantile states whose balance sheets between economic reinvestment and military expenditure tipped them into relative, and eventually absolute, decline. The mercantile state may also forgo the benefits of cultural and political cooperation that eras of peace can bring. Like the famous, faceless player in the Prisoner's Dilemma,1 the mercantile state will routinely make suboptimal competitive choices out of the fear and suspicion that is conditioned in a society that has accustomed itself to long periods of conflict and is inept at collaboration. The managerial state will inevitably resort to re-regulation as a means of dampening conflict within its regional institutional group, and this is likely to lead to suboptimal economic performance.
One market-state already appears to have opted for the role of mercantile state: Japan. With its literate and educated people, largely devoid of ethnic conflict and possessing the most restrictive immigration laws of any major state, Japan is well placed to conduct a campaign of relative increase in enrichment at the expense of its trading partners. With a history of high savings rates, Japan can avoid some of the intergenerational conflict that otherwise accompanies state borrowing. Japan can also avoid the public order problems that seem to dog every multiethnic society, including the problems associated with immigration that are tolerated by societies that depend on a fresh source of cheap labor that Japan does not yet need owing to its practice of rigorous self-denial in personal consumption.* A mercantile trading policy depends on control of one's currency, which is supported by strictly enforced limits on public spending, and the presence of value-added industries that dominate the terms of trade. Japan has to a large degree been able to pursue such a policy. The difficulty with this course, as Japan's experience shows, is the rigidity and self-dealing that infest a mercantile state, transforming its markets by secretive, deceptive, and even corrupt practices. An entire banking sector run on the model of the military-industrial complex, for example, is unlikely to be the most efficient agent of domestic growth.
Is the mercantile role an appropriate choice for the United States? There is some doubt, in any case, whether the United States will be able to maintain a workforce capable of successfully operating in the high-technology industries that give a state favorable terms of trade. With the most relaxed immigration laws of any major state, the United States both adds to its welfare expenses and fragments its cultural unity.* Because of its decentralized social and political structures, the United States is unable to curtail individual consumption, leaving it with a high trade deficit (which results from lowering the costs of goods to the consumer through imports), a decade of high budget deficits (which results from lowering the costs of government to the taxpayer through borrowing), and a high national debt3 that will have to be repaid even if, as some predict, the budget deficits might cease (the result of the interaction of the first two phenomena as money from imported capital and tax rebates fueled a period of rapid growth). There is little prospect for a change in course: indeed, if the market-state is constituted to enrich the opportunities of individuals (and not simply to enrich the people as a whole) why should a multicultural, multiethnic state like the United States impose austerity measures that address these problems? Most individuals, including especially the children of the poor, are far better off under current U.S. policies than they would be under taxes and monetary rules that penalized borrowing and importing. Only the children of the future are penalized, and multicultural market-states appear to feel somewhat less responsibility toward the unborn. In this way the market-state plays to American weaknesses as well as to our strengths.
In one respect, however, those particular weaknesses tend to undermine the maneuverability so crucial to the market-state. That weakness has to do with the “followership” traits of the American people at this time, traits that are indispensable to a successful mercantile state. An August 1995 poll of Americans revealed that 59 percent said that there was not a single elected official that they admired. Of the 36 percent who said they could think of one, the president was named by 6 percent, his then opponent the majority leader was named by 5 percent, and the new Speaker of the House by 4 percent.4 Such coolness toward authority does not evidence the sort of social adhesion to the State that wins multistate conflicts.
But to say that the United States is not well situated, considered in the abstract, to be a mercantile state in the era of market-states, is not to say it could not prevail in this role. It need only be relatively well situated, vis-à-vis its competitors, and here the size of the American market, its role as currency provider for the developed world, and its abundant natural resources still ensure that, should it choose, it could dominate Japan or the E.U. or any other such competitor in a mercantile competition (so long as it could prevent the formation of an anti-American cartel, such as might occur between the E.U. and Japan). Precisely because we were so unsuccessful at developing exports—which account for less than 25 percent5 of GNP—the United States has far less to suffer, in relative terms, from a decline in world trade and retaliation against American mercantile practices. We could be a successful mercantile state, as a market-state, as we were, despite our many shortcomings, a successful mercantile state as a state-nation.
That does not, however, decide the matter. Should the United States choose this option? What are the costs and benefits (for that is how the market-state will measure things) of being an entrepreneurial state? The entrepreneurial state would pursue the enhancement of universal opportunity through a nonmercantile, free-trade policy. An entrepreneurial state would allow for relatively free immigration so long as the costs imposed by immigrants did not significantly affect the wealth and wealth creation of those taxpayers already present. It would seek environmental protection and nuclear nonproliferation through any effective means, collective or unilateral—by force if necessary in extreme cases—because the general enrichment of mankind is a consequence of success, even if a single hostile state loses as a result. It would employ multilateral alliance systems, of which NATO is an example, 6 to expand collective security but be prepared to join ad hoc “coalitions of the willing”7 when collective security institutions are stymied. Paradoxically, such a state would be more prone to intervention—in cases of ethnic cleansing, humanitarian relief, support for the peoples of hijacked democracies, the destruction of terror networks— than the mercantile state, which husbands its violence to pursue more directly mercantile goals. If being an entrepreneurial state leads to more absolute wealth, does it actually encourage reinvestment of that wealth, or is this wealth frittered away in various adventures? Even more important, can the entrepreneurial state avoid cataclysmic war more successfully because it can remain armed without the constant friction of strategic competition inherent in a system of mercantile states? Is the aggressive mercantile state in fact more likely to be weak militarily because it is so desperate to throw its resources into economic competition, while at the same time it fails to develop the cooperative practices that can ameliorate crises and conflicts? And if it is, and the choice of the mercantile option by other competitive states actually becomes a source of comparative advantage to the United States, should we continue to produce collective security goods, like the creation of the coalition that fought the Gulf War?
And what about the option of the managerial market-state? The United States is poorly situated geographically to lead a regional trading bloc. Canada represents a small market, Latin America an uncertain one, separated by language and culture from the United States. It is true that there is a large and rapidly growing Hispanic minority in the United States, but this pool of talented persons is not necessarily making the United States more congruent with the places they left. The day is far off when North Americans will grow up as bilingual as, say, people in Belgium or Denmark, where more than one ethnic community coexist.
And why, in the age of the Internet, should physical proximity dictate the boundaries of regional trading blocs whose trade will be mainly in nonphysical items? Suppose the United States were part of a “virtual” region, composed of the United Kingdom, Singapore, India, the Philippines, and Canada. This might make the managerial model more palatable. The real question then becomes: Should the United States take the fateful step of creating a second E.U.—an “Economic Union” like the European Union—knowing that by so doing it hardens the lines of world competition and forfeits its unique, even transcendent role? If, as appears likely, the world will have an E.U. for the indefinite future, having two seems to be a step in the wrong direction that we should only take if we are compelled to do so.
One proto-market-state that appears to be heading toward the role of managerial market-state is the new state of Germany. Although more truly multicultural than before, owing to the amalgamation of capitalist and socialist societies and the most open immigration policy of any E.U. member, Germany possesses a common language and a highly educated workforce. Germany's crucial roles in the E.U. and in NATO—linking economic and security interests, Atlantic and continental—give her the collaborative position that might have been Britain's (and under Tony Blair may still be). Unlike the United States, Germany has managed to maintain a strong currency and strong exports. Germany's venture into high debt is a model of imaginative investment in infrastructure because the proceeds of the borrowing went into the acquisition of East Germany and not into mere consumption. A collaborative foreign policy depends on refusing to tolerate or to become a free rider (that is, a mercantile state within a free trading system) and the willingness to use force to maintain world order and the ability to do so without exciting fear in other states. Germany has the self-discipline and the wealth to do both. Although Germany has been made the diplomatic scapegoat by her allies over Yugoslavia for her early recognition of Slovenia and Croatia, and although she has hitherto refused to take up security responsibilities outside the NATO area (as in Kuwait), it is noteworthy that she has since modified this policy and offered air force assets to protect the “safe areas” of Bosnia at a time when other NATO states were dithering. More recently, Germany offered military assistance to the coalition effort in Afghanistan. It remains to be seen whether Germany's wretched twentieth century history will be redeemed by her commitment to human rights in the twenty-first century or will cripple her altogether, making France's enforcer in Germany's more submissive periods and Eastern Europe's neocolonialist when German self-confidence asserts itself. NATO enlargement is one way the United States has encouraged the healthy development of the new German state.
Absent an acute threat to American survival, the United States may simply lack the sense of purpose to be an effective entrepreneurial state. Perhaps more than at any time since the civil rights revolution, the United States needs political leadership to re-establish a national history that reflects our strengths of character, our inventiveness, our talents for cooperation and our benign ambition, and above all, our confidence in a common enterprise.8 President Clinton moved the United States far toward the market-state. President George W. Bush has entered office at a crucial time, and appears to be equally committed to this new constitutional order.
The very nature of the entrepreneurial state, however, with its decentralization, its economic evaluation of all policy, its meritocratic competitiveness, and, above all, its taste for irony and amusement, will not make either leading or following easy. It is, however, a sense of purpose that is most required by the entrepreneurial state, because only such a sense—cultural, intellectual, artistic, as well as political—can endow a national history sufficient to move our distracted people to take up the distant and abstract burdens of such a state. We usually imagine leadership to be concerned with the future, but in fact it is the shaping of the past in the crucible of the present that empowers leadership because it gives an identity and a common perspective to those who would follow. We must feel that we are the heirs to the responsibilities the entrepreneurial state would impose on us, that they are our natural inheritance. Only history can do this, for it unites strategy and law by telling a story that provides us with a basis for legitimacy, that is, with some other self-image than the one in the narcissistic mirror of the present.
Finally, we must determine which of these three choices, managerial, entrepreneurial, or mercantile, better reflects our role in the world, as it is and as we wish it to be. Which method of pursuing the goals we have embraced will evoke from our people those resources of will and unity and common enterprise that enabled us to prevail in the Long War? A mercantile state can unite us against a common foe and give us a central purpose, but it turns our people into an instrument. Education is undertaken for the enrichment of the business enterprise, not the intellect. Defense is belabored because it cannot show a bottom line, while our streets and our cities become more precarious than many theatres of war, and security itself becomes privatized by house alarms and psychiatrists. A movement toward a mercantile market-state by the United States will effect a decline in interstate cooperation at the very time when successfully opposing terrorism, international crime cartels, and the spread of weapons of mass destruction requires international collaboration.
On the other hand, an entrepreneurial state is not without its risks. Constitutionally, such an American state would reverse two of the impor-tant developments of late twentieth century American jurisprudence: the weakening of the executive and the decline of state and local government. An entrepreneurial state must have the executive authority to use force expeditiously and to keep its security secrets, two things an American president is hard-pressed to do today. The transparency in governmental affairs that is demanded by the citizens and the media of the market-state make its entrepreneurial form especially difficult to achieve. Yet such capabilities for secrecy are crucial for the entrepreneurial state because it is committed to enhancing world stability and thus even relatively abstract challenges—nuclear proliferation, ethnic cleansing in remote regions, international terrorism, environmental depredation—must nevertheless be dealt with decisively, which often means without previous public exposure of operations and plans.
At the same time, the experimentation and innovation so dear to the market-state may thrive more abundantly under the federalism of the entrepreneurial state than under an omnicompetent government characteristic of managerial market-states. An entrepreneurial state might encourage the locality as a laboratory and even tolerate wide variations in, for example, welfare benefits and criminal sanctions that would be inimical to the managerial state. But simply increasing the authority of local governments, which will be whipsawed by corporations demanding tax and environmental concessions, on the one hand, and special-interest groups attempting to heighten regulation, on the other, is no answer. The smaller the jurisdiction, the greater its vulnerability. Perhaps only a managerial, continent-sized state like the United States can withstand the alternating threats to relocate (by the corporation) or frustrate (by the special-interest groups). In an entrepreneurial state, invariably there will be wide differences in local laws. In a country as tormented by race as ours, such variations are bound to produce invidious inequalities and discrimination. Can we afford to sacrifice the unity that a managerial state provides, even in peacetime? An entrepreneurial state, which we have so richly earned, could be an era of renewal for the United States in which enrichment means more than positive trade flows. But it could also lead to the disintegration of the State into regional, quasi-racial, and religious enclaves, devoid of any sense of overarching identity.
Of course no state in the real world will embody 100 percent of any of these caricatures. Some states seem historically tilted toward one model: France, for example, appears to want to lead the E.U. into becoming a managerial superstate. Others, Britain and the United States for example, incline toward the entrepreneurial model. Still others, notably Japan and China, seem to have thrown their futures in with a more mercantile approach. Whatever choice we make, we will have to find a way to compensate for the market-state's inherent weaknesses—its lack of community, its extreme meritocracy, its essential materialism and indifference to heroism, spirituality, and tradition. The entrepreneurial state attempts to ameliorate the effects of the market through ad hoc institutions of maximum flexibility; the mercantile state compensates for the market by calling on national elements of competitiveness and achievement. The managerial state falls back on regulation to achieve stability and the ever-elusive “level playing field” so beloved of lobbyists who seek advantage, not neutrality, for their clients. All three models must cope with citizenries that are increasingly alienated from the State itself, indeed from the very societies that share the scope of the modern state—too large to comport with postmodern identities, too small to be viable on their own. There is a direct, although often obscured, line between the ever-presence of the threat of weapons of mass destruction (WMD), the immediacy of television images everywhere on the globe, and the very immanence of economic vulnerability, on the one hand, and the constitutional evolution of the State from a state focused on the people as a whole to one focused on persons, on the other.
This need not be a cause for despair. American society has much less invested in its identity as an ethnic group,* if indeed it has had such an identity since the Civil War; it has less to lose by shedding this constitutional form.† It is well placed to make the transition from nation-state to market-state. In the passage to a legitimacy conveyed by assuring opportunity—with its need for transparency in government operations, its enhanced possibilities for enrichment, its meritocratic egalitarianism—the United States could develop a more responsive government, acting in fewer areas with greater confidence.