CIAO DATE: 05/02

Georgetown Journal of International Affairs

Volume 1, Number 1, Winter/Spring 2000

 

The Virtual State & Global Politics
Review by Richard Mansbach

 

Richard Rosecrance. The Rise of the Virtual State: Wealth and Power in the Coming Century. New York: Basic Books, 1999, 256 pp. $25.00.

”The operations of the virtual state and of nations concentrating on high–level services are fundamentally progressive,” declares Richard Rosecrance near the beginning of The Rise of the Virtual State. This claim sets the tone for this splendidly written, highly accessible, and genuinely important book. From start to finish, Rosecrance is determinedly upbeat and optimistic. History, he believes, is going somewhere, driven by economic change in which commerce first replaced territory as the main source of prosperity and power, and then yielded to a globalized economy driven by knowledge and creativity.

The theoretical perspective behind this argument is a step beyond the trading state that Rosecrance described in his 1986 book, The Rise of the Trading State: Commerce and Conquest in the Modern World. The economy of the virtual state is “increasingly based on intangibles and brainpower,” and manufacturing has been progressively moved offshore. Thus, the world is divided between “head” nations, which design products, and “body” nations, which manufacture them. Head and body states become more and more interdependent as firms downsize and move their productive facilities offshore. This “interdependence of production,” Rosecrance claims, is “far stronger than an interdependence of trade.” His conclusion is strong and confident: “The rise of the virtual state thus inaugurates a new epoch of peaceful competition among nations, promising a cooperative transition to the new millennium.”

Rosecrance’s argument fits squarely in the liberal tradition that sees economic progress bringing an end to interstate violence. Its thesis recalls the work of William James and Joseph Schumpeter who argued that industrial capitalism would make war and warriors obsolete. Even more strongly, Rosecrance’s work cannot but remind readers of Norman Angell, whose prophetic and highly influential book The Great Illusion, published before World War I, persuasively argued that war among Europe’s highly industrialized states had become prohibitively expensive owing to financial and commercial interdependence. The declining importance of territory plays a central role in Rosecrance’s argument. The transition of states from their mercantilist past through their industrial and commercial stages until achieving “virtual” status has progressively reduced the importance of territory in global politics. Encouraged by the revolution in microelectronic technology, factors of production in the virtual economy have produced a “progressive emancipation from land as a determinant of production and power.” States increasingly recognize that territory no longer provides military security or economic prosperity. Whereas the seizure of land used to lead directly to increased wealth and power, the fact that this is no longer true reduces incentives to war.

While there is much that is true in this argument, we should be wary about accepting it without reservation. Rosecrance’s optimism is partly the result of his narrow view on the causes of war. “War,” he declares, “has retained a place in international history because it enables one country to seize resources from another.” Rosecrance curtly dismisses arguments that wars might have additional causes. It is difficult to accept his conclusion that the frequency of war will decline because the role of territory has declined. From Kosovo to Kashmir and from the Golan Heights to Chechnya, territorial disputes continue to threaten large–scale war.

Rosecrance, however, is too sophisticated to see peace as an inevitable outcome of the process he describes. He reviews what he calls “the conflict–as–usual thesis” and concludes that war will continue in those cases where territory remains a major factor. He examines a variety of claims about domestic and interstate conflict, admitting that there is significant potential for ethnic and class–based domestic conflicts.

Rosecrance asserts that in some instances, a “history of competition for power among states does not generate confidence that major conflict can be avoided.” He does, however, firmly reject the structural determinism of neorealism. Indeed, Rosecrance’s argument here assumes something of a constructivist face when he affirms that what states actually do “is a function of the relationships they maintain with other nations.” Thus, he declares that state interests and their sources of influence have changed dramatically. If, in fact, economic incentives become as detached from particular territorial bases as Rosecrance envisions, then the resulting fluidity in state objectives might make international interests quite malleable indeed. “The influence that twenty–first–century countries seek is not nineteenth–century control,” but is instead the influence to be gained by opening foreign markets.

Having elaborated his theoretical perspective and its implications for global politics, Rosecrance turns his attention to the major players. Hong Kong, Singapore, and Taiwan are, for Rosecrance, prototypical virtual states. They have prospered with little or no territory by specializing in services at home and by investing in offshore production facilities, especially in China. By contrast, Japan, though pioneering the role of trading state, has not gone as far as the United States in emphasizing services, moving production offshore, or, even more significantly, reimporting that production. Japan, he concludes, “has mastered half the revolution: it encourages flows outward, not flows inward.” Rosecrance identifies the United States as the leader of the virtual revolution with Europe a close second. Russia and China remain at least partly territorial in outlook, yet even these cases fail to dampen his optimism. “The lesson of the new international economy,” he declares, “should be that countries that have already achieved economic hegemony do not need to assert it militarily.” This “should” is reminiscent of Angell. From this liberal perspective, the European states of 1914 should have known better but apparently did not.

Certainly, the economic revolution described by Rosecrance gives grounds for optimism. It has been an unprecedented source of prosperity for many countries, yet it is not hard to imagine how major conflicts might erupt involving some of the world’s less liberal states: Russia, China, North Korea, Pakistan, Iraq, and so forth. (And as the U.S. Senate’s refusal to ratify the Comprehensive Test Ban Treaty and hesitation to pay America’s debt to the United Nations should remind us, recognition of the superiority of economic over military competition and of high interdependence of virtual states is scarce in Washington as well.) One should hope that the world is going where Rosecrance thinks it is, but it is difficult to feel secure that it is doing so. Indeed, it is not a stretch to imagine the United States falling prey to isolationist and neomercantilist attitudes. Were that to happen, all bets are off. Indeed, neither Russia nor China poses as great a threat to Rosecrance’s peaceful world of virtual states as does the United States.

Although he writes at length about the role of transnational corporations in creating a virtual world, they seem curiously devoid of autonomy. They are described as “the essential link between head nations and body nations” and as “transmission belts that provide for mutual influence between design nations and production nations,” but they never assume a life of their own or play an independent role in global affairs. Needless to say, this seems to contradict the spirit of his broader argument.

The Rise of the Virtual State is more than a stimulating work of considerable theoretical merit. The clarity of its prose, its analysis of the historical evolution of the relationship between global economics and global politics, and its detail of contemporary case studies make the book an excellent candidate for a sophisticated primer in international political economy.