Some believe that we are rapidly moving towards a world government. The European Union was one of the most visible expressions of this motion. NAFTA, ASEAN, and other trading blocks were seen as small moves in the same direction. The UN was the dream of the mushy-headed, those living on intellectual welfare with no real-life experience of how wealth is created.
A world government would be unsustainable if it ever came to pass, for the kind of people who work in governments always take pride at backstabbing one another, as well as their competitors in other governments. People’s lives have changed tremendously, given easy travel and high technology, but the structure of governments has not changed.
The world is becoming increasingly complex, but the institution of the state has remained mostly unchanged, making large governments very brittle.
Duty-free shopping exists in every country, for each of these governments competes to benefit itself by helping travelers avoid paying taxes to other governments. The US, the world's self-appointed chief policeman, is among the worst (or best) in this respect. While governments in the Caribbean islands and many smaller nations — mostly termed tax havens — get bad reputations for secrecy (and hence, my own respect), Miami, New York, and London are probably the world's capitals for secrecy and tax avoidance as long as you are not the milk-cow of the US or England.
One might even ask how is it that such a large number of properties are bought by Chinese, Ukrainians, and Russians in the US, Canada, Australia, and the UK. If these Western governments ensured that unaccounted money did not come from abroad, their hot property markets would crash.
The US makes almost no attempt to locate safety deposit lockers filled with US-dollar cash in jurisdictions outside the US. The government likes the convenience of interest-free loans in perpetuity from the cash holders. Using FACTA and all kinds of obnoxious enforcements on no other basis than American exceptionalism and its bullying power, the US gets the information it wants from other governments, but none dares to ask the US to reciprocate.
So far from world government being likely to happen, the future belongs to smaller states. But this will happen after a lot of turmoil.
Most banks comply with US bullying, although the cost of compliance is horrendous for financial institutions around the world. One day a breaking point will come and they will stop. Perhaps an alternative international currency will trigger this.
The US won’t be there forever
With every generation, glamour moves to a different jurisdiction. When I was growing up, it was France for fashion and snobbery, England for style, and Japan for the work ethic. A generation later, with all others having receded to the background, it became the US.
It is worth talking with today's teenagers in Asia. They follow Korean fashion, pop music, and soap operas. In sub-Saharan Africa, it is Indian music and movies. What the world looks up to will increasingly be Asia, while America recedes into the background.
If you find a Chinese girl with spectacles and no lenses in them amusing, you haven’t kept up with the fashion trends that originated in Korea or Japan. In Seoul, you will meet visiting teenagers from Malaysia who sing in Korean, and you can bet that they watch K-pop at home.
If you see girls wearing shorts that are a millimeter below the danger zone, but with the waist-band that does not end at the waist but much above the navel, you know where that fashion came from: from girls who worry about possibly having short legs. If you find men wearing tight pants, you know that the fashion is not from the West.
The bigger states will break
Before the world starts ignoring the diktats of the United States, America will become increasingly heavy-handed. Anything it doesn’t like will be considered "terrorism." For Americans, privacy will cease to exist. This is not based on prophecy, but on the history of how human civilizations have evolved and gone out of existence. The Roman Empire disappeared. So did the English and the French empires.
In other large countries — India, Brazil, France, the UK, etc. — the institution of government will come under huge amounts of stress, as heightened expectations of a populations hugely influenced by the modern-day welfare system can no longer be met. The world is becoming increasingly complex, with new technologies and cheap traveling, but the institution of the state has remained mostly unchanged, making large governments very brittle.
While all conventional religions are tribal in nature, they at least have elements of compassion, honesty, and other virtues. But statism thrives on hatred for other people.
To me the “Arab Spring” was the first visible sign of this. So was the democratic movement in Hong Kong. Behind the facade of higher vision and increased nationalism is indoctrination of a populace that is incapable of critical thinking, the kind of populace that in earlier generations would have stayed out of having an opinion on public policy. They have come to see democracy as a magic wand that delivers whatever one aspires for, merely through the vote. Nationalism is the emotional crutch for their failure to be self-dependent and their lack of self-confidence. None of these fake, irrational values can keep big nation-states glued together when the crunch time comes.
The result will be the possible breakup of many of the larger states. Would the US also break up? The irrational tribal slogan — “we are the biggest and the best” — can keep the US together for only so long. So far from world government being likely to happen, the future belongs to smaller states. But this will happen after a lot of turmoil, ironically made worse by the fact that in general, today’s populace is likely more statist and patriotic than the previous generations.
Central America: case studies on small countries
I have been very impressed with how well Hong Kong and Singapore are organized. In fact, I have become enamored with small countries.
I recently spent two months travelling in Central America, trying to understand its economy and people. I spent a fair amount of time in Boquete, Panama, a place where a large number of American expatriates live. When I was there, a girl with a flirtatious look (and from what I understood, based on my talks with the locals, her only competence) was elected as the local political representative. Alcohol was banned during the election days, but that did not stop restaurants from serving it, in coffee mugs.
The populace in Central America is not necessarily more awakened than that of the United States — perhaps much less. But does that matter? Mostly people are ambivalent about the existence of expatriates, if not grateful for their contribution to the economy. The state is alive and well there, but I hardly care about the state anymore. What I care about is how it affects me.
These small states recognize the economic importance of expatriates and mostly let them get on with their lives. Protecting property rights is their core competence. Nicaragua, for example, has become an attractive place for property investment, offering the cheapest options for those who can navigate this emerging country. In terms of expense, Panama is in between Costa Rica and Nicaragua.
Panama offers quality at a reasonable price. It also uses the US dollar, which is not the best way to run a monetary policy, for it is still dependent on a fiat currency, but this ensures that Panamanians cannot run their own printing press. Of course, they have no central bank of their own, and hence no cartel that comes with it.
Why is a place such as this, relatively conflict-free and wth enormous natural resources, not very rich?
Not only Americans and Canadians but also those from Ecuador, Venezuela, and other countries are finding safety in Panama. As a rule of thumb, small countries offer asset protection that big counties don't, for if these small countries stop respecting property rights, expatriates will fly away with their money.
Neither Costa Rica nor Panama has a military. This not only saves what would have been about 5% of the GDP in wastage but it sets a certain way of thinking among the citizenry. War is the health of the state, and statism is the worst religion. While all conventional religions are tribal in nature, they at least have elements of compassion, honesty, and other virtues. But statism thrives on hatred for other people. When you have the military solely for defence, narrowly defined (as is the case with Singapore and Switzerland) or have no military at all (as in Panama and Costa Rica), the social mindset is not about hatred for people who are different.
The repercussions are far-reaching. Less hatred also means fewer social conflicts within such societies, and hence a lack of civil wars within these countries. One must still be cautious about isolated crimes.
Incidentally, Central America is a unique place for nature lovers. This small piece of land separates two major oceans, the Pacific and the Atlantic, and hence is a channel for equalizing weather differences between the two oceans. I cannot think of another place where the forests change within minutes of walking, as you move from the area influenced by one kind of weather system to another, just on the other side of the ridge.
When traveling around in Costa Rica and Panama one must wonder — as I did — why a place that has been relatively conflict-free and has enormous natural resources is not a very rich place. Businesses tend to hire expatriates as much as they can. Locals are not known for their work ethic. Why this is the case, I am not sure. But that is why I travel, for it forces me to think about issues that would otherwise not occur to me. It hones my understanding of cultures, politics, and economics. Again, as an individualist, what I care about most is what affects me; and I doubt that the realm of One World Government would stimulate me much.
