This article is the first of six in-depth analyses dedicated to the main themes of the book “The Sovereign Individual”, the work written by William Rees-Mogg and James Dale Davidson that anticipates the transformation of modern States in the information era.
History teaches us that every great technological revolution brings profound changes in power structures. Just as gunpowder ended the domination of medieval knights and feudal lords, today the “microprocessor, Internet, and cryptography” are eroding the foundations of the modern Nation-State as the dominant entity in social organization.
In the book “The Sovereign Individual”, Davidson and Rees-Mogg outline a future where the traditional state monopoly of violence and taxation is progressively dismantled by digital technology. In the past, States prospered through “returns on violence” on a large scale, being able to control territories, resources, and citizens through force and bureaucracy, that is, the state’s non-overtly violent force. Today, however, technology allows individuals to escape such control, transferring their economic activities to cyberspace, a territory without physical borders or taxable jurisdictions, where digital transactions escape the control of traditional authorities.
According to the authors, in the coming decades, States could lose 50 to 70% of their fiscal capacity. Such a collapse will likely trigger desperate reactions such as:
- uncontrolled inflation;
- arbitrary confiscation of assets;
- attempts at “fiscal kidnapping” of the wealthiest citizens.
However, such attempts will clash with the mobility of digital capital and the cryptographic defenses now available to individuals. For the first time in history, the ordinary citizen can effectively protect their wealth without having to depend on brute force.
For the authors, cyberspace will emerge as the “ultimate tax haven”, an environment where transactions occur outside the reach of traditional authorities. This will lead to a “fragmentation of sovereignty”: monolithic States will give way to smaller and more competitive jurisdictions, similar to city-states of the past, which will offer protection and governance services on a contractual basis.
Such a transition will not be peaceful. Governments will react with violence, attempting to limit access to tools like cryptography and imposing forms of digital censorship. But these efforts will be temporary and ineffective.
Sovereignty, once a state monopoly, will “commercialize”, transforming citizens into customers and governments into competing service providers. Traditional politics, a symbol of the industrial era, will become a “comic” anachronism, as knights in armor might have been comical and useless on the battlefields of World War I.
