Technology and Globalization – Challenges to 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 have become part of conversations and debates.

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 here. 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 defined a country’s international rights though they did not define how a country’s sovereignty was governed, nor did they define what fundamental freedoms residents had within a country. The different views on what freedom is fundamental 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 presented challenges to sovereignty as information and ideas are freely shared and debated within and between countries. Freedom of expression and freedom of religion were not considered freedoms in the 17th century. In some countries they still are not though I believe it is generally shared that personal expression and personal religion should be allowed worldwide as long as they do not infringe on the freedoms of others.

One of the powers of sovereignty is to create and manage a monetary method of exchange. A money system. In recent years, a challenge to this has emerged with Blockchain and digital “crypto” currencies. Enabled by the Internet, these do not know borders, which have become an issue with how they affect, and in some ways, circumvent a country’s sovereignty and its monetary policies. As technology usually does, it has also jumped ahead of the government’s ability to regulate and protect its citizens. Though as with the Internet, there is much benefit in letting technology experience its highs and lows so as not to inhibit progress. Though as the Internet challenged a country’s sovereignty, so has blockchains and the technologies enabled by them.

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 greater control over its financial well-being. This control has been used wisely by many though also greatly abused by some 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. Latinum and energy credits may be the future, though FIAT is the way of today. (Pardon the Star Teak Reference.)

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 or its sovereignty. 

Money, like knowledge, has been controlled by countries. As Ray Dalio points out in his 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 legacy monetary systems. Whether this is good, 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 undergone 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 in another 100 years, the ideas we debate and even 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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