This article will argue that denationalization is a necessary component of a free market society.
This is important because without the idea of citizenship the idea of a state becomes radically different from the modern state and much more like the anarcho-capitalist notion as described by David Friedman in The Machinery of Freedom and by others elsewhere.
Denationalization is privatization which occurs with respect to the state. Hayek wrote an amazing book arguing both that we should denationalize money, and that it will inevitably happen regardless of whether we choose it or not as market forces play out. His predictions coming true in part through bitcoin. Hayek also sagely discussed the fact that there is no clear distinction between money and non-money, a point very much worth noting.
Denationalization, however, is a much more powerful force than even Hayek realized. Replacing police dependency with self-defense law reduces crime. Decentralized law, private arbitration for example, provides results significantly faster and, usually, cheaper than traditional law. It seems decentralization is beneficial in principle. This is consistent with the fact that free market principles apply to all kinds of social action and coordination, not merely commercial transaction. I would even hypothesize that a fully decentralized military and criminal justice system would be superior to our current statist regime.
Citizenship itself must also be decentralized. I will make two economic arguments and then we will also run into some theology here. The first economic argument is that national sovereignty historically moves with money. When Europe began trading together it soon created the UN, and as the US opens trade with foreign nations we continue to give political power to international treaties. This means that the bitcoin or a similar denationalized money technology like it will force the global decentralization of citizenship.
The second economic argument is that decentralization increases competition which is more efficient than monolithic traditional governments. While one might think that we should prefer efficiency, and we should, the real implication of the term is closer to a prediction of inevitability. If something is more efficient it will displace the alternative over time. It is true that economic efficiency is often preferable, but the more striking point is that the magnetic pull of efficiency is entirely irresistible over the long term.
There are also religious arguments for denationalization. I will briefly discuss the example in Christian theology. Christians are called to be heavenly citizens. Philippians 3:20 says, “…our citizenship is in heaven,” referring to Christians. Hebrew 11:16 says that Christians, “desire a better country, that is, a heavenly one…” We are then told that God has prepared a city which will fulfill that desire. 1 Peter 2:11 calls Christians foreigners while we are under the authority of various human governments. Christianity also maintains other principles including the fact that a servant cannot serve two masters, a slave should obey his master but gain freedom if possible, a citizen must follow the law of the land and Christianity must be adopted on a voluntary basis.
These principles collectively throw the Christian into a crisis of conscience when confronted with subjugation to a state with immoral law. To reconcile these issues the Christian must be able to reform the immoral state or else remove to a moral nation. In light of a stubborn political system, denationalization provides perhaps a better way out. A pessimistic view on the state would be that immorality is an inescapable tendency. If that is the case then denationalization is not only an alternative to internal reform, but the only real option.
Denationalization is in various forms is happening already. Seasteading is the idea of creating permanent dwellings at sea, even to the size of cities or nations. This allows prima facie a very odd and perhaps unworkable, but on further consideration a creative, entrepeneurial and futurist approach to political reform using external pressure from the market forces generated through creation of new nations. Yacht Island Design is an example of a seastead designer. The Seasteading Institute is a thought leader on the topic. Ephemerisle is a libertarian festival which doubles as a proof-of-concept.
There are also myriad attempts to create new nations on land. Edan Yago was involved in the Honduras Free Cities Project. That project was a failed project attempting to get Honduras to authorize competitive political zones with relatively full political autonomy. Yago is now back with a new approach, this time adapting to encompass a bitcoin-based economy. He estimates that a deal will be made public Fall 2013.
The last place we will discuss in which people are trying to create new nations is the internet. Voluntary and anarchic societies are cropping up on the internet with the assistance of cryptography and distributed networks. Bitcoin is a cryptographic currency. There are stock exchanges, peer to peer lending platforms, crowdsourcing platforms, charities and traditional businesses which operate using bitcoin. While it may be of questionable morality, cryptography allows a large degree of blatant disregard for de jure law because it renders much of it unenforceable. The internet can set its own policy in these financial arenas and any other arena which doesn’t involve offline action.
In conclusion, competition is fostered by decentralization. Taken to the extreme, decentralization includes denationalization. The efficiency offered by competition makes these systems not only preferable but inevitable. The inevitability of denationalization means that society must begin to adapt and prepare for circumstances which we are not common in modern times. Fortunately, some people are innovating in ways that will properly accommodate stateless society. Bitcoin, seasteading and the Free Cities Project are examples of ways in which people might finally achieve competitive governance.