Westphalian Sovereignty

I was first introduced to the 17th century Treaties of Westphalia in high school though it was glossed over with many other European treaties, agreements, and other general information about Europe. Over the past few years, its impact and meaning has become part of more conversations.

The Treaties of Westphalia, also called the Peace of Westphalia, are credited for the creation of countries as we know them today. Though there is another school of thought that it didn’t though we won’t get into that debate. Check out the WikiPedia site for more info.

The treaties set out that countries, as we know them, are sovereign. Thus, as sovereign implies, a country held supreme power over everything and anyone within its defined borders. In the 17th century, it was much easier to think about this. With no flying machines or international connectivity, borders were hard lines between countries.

The treaties also defined a country’s international rights though it did not define how a countries sovereignty was governed or define what freedoms its residents had within the country. The different views on this have caused strife and turmoil between countries for centuries.

There was no globalization in the 17th century. Advances in transportation and communication have led to the integration of people and companies from different countries. The spread of the Internet has caused sovereignty and other issues as information and ideas are freely shared and debated. Blockchain and digital “crypto” currencies, enabled by the Internet, have become an issue with how they affect, and in some ways, circumvent, a country’s sovereignty with its monetary policies.

A country’s monetary policy is one pillar of how it maintains its stability. Through control of interest rates and money supply, a government can maintain great control over its financial well-being. This control has been used wisely and also abused by governments. FIAT money in use by almost every government today is created by the government and is the exclusive property of the government. While I believe this will change in the future and that the current system is the legacy solution, I don’t see this changing quickly and possibly not in my lifetime.

The Internet enabled the free flow of information and interaction around the world. From kids in Africa learning from the best college teachers in the USA to people from all countries interacting with people in other countries sharing ideas, knowledge, and friendship. The Internet’s ubiquity allows knowledge and ideas to flourish without regard to a country’s borders. 

Money, like knowledge, has been controlled by countries. As Ray Dalio points out in his latest book, whoever controls the world’s reserve currency has the most important power in the world. The concept of no one controlling a world reserve currency is frightening to those that know how to work with the system as it is today. Blockchain technology and cryptocurrencies present a clear and present danger to the legacy monetary systems. Whether this is good or bad, or just inevitable, makes for a lively discussion.

Countries as we know them are only a few hundred years old. And the idea of a sovereign country is less than that. Civilizations have gone through many transitions in the few thousand years we have inhabited this planet. As I think about the sovereignty of nations, I can’t help but think that if in another 100 years’ the ideas we fight about today will be but a page in our history books.

And in a future post, we can review whether countries are truly sovereign or is it just an illusion that even the politicians and leaders of countries fall for.

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