The Network State

Once upon a time a Sumerian chieftain might have looked at the newly designed grid of irrigation canals and asked himself what it meant for the future of politics. In his new book, Startup founder, investor, and former Stanford professor Balaji Srinivasan looks at the internet today and ponders its political implications. He concludes that nation states and territorial sovereignty are becoming as obsolete as those empires founded on upriver control of irrigation: Networks that connect nodes in the “cloud” are becoming “startup societies” that may evolve into “network states.” Conversely, technology could be facilitating a more perfect totalitarianism.

Technology initially facilitated the nation state. Srinivasan highlights how in previous eras mapmaking clarified fuzzy borders; printing codified national tongues; and firearms helped to redistribute power from elites to ordinary people. One may add that canals and railroads, the telegraph, the radio, television, and national mass media enabled centralized nations. But since the middle of the 20th century, Srinivasan emphasizes, technology has been decentralizing and fragmenting what had been unified. The internet unbundles society into its constituent parts, and then rebundles them like playlists in music streaming services by connecting peers to peers.

Social networks are founded on geodesical nets rather than geographical locations. Facebook has far more nodes at more locations than any historical empire has ever had. Remote work is becoming the norm.  “During the pandemic, every sector that had previously been socially resistant to the internet (healthcare, education, law, finance, government…) capitulated,” Srinivasan notes. In the future, virtual reality may enable distant physical work through robotic avatars. Meanwhile, cryptocurrencies are shifting monetary policies from central banks to the diffused net. The invention of smart contracts that act automatically when set conditions are satisfied (for example, when a property is listed publicly as owned by a buyer, a bank account automatically sends funds to the seller) might eliminate the need for national adjudication, laws, and enforcement.

Blockchain technology may record in a public ledger all financial transactions and smart contracts, to form a grand archive of humanity (Borges’ Library of Babel comes into mind). As Srinivasan writes, “the first draft of history will be the raw on-chain event feed, written directly to the ledger of record by billions of writers and sensors around the world.” Some states and municipalities have already transferred many functions to digital platforms: El Salvador uses a cryptocurrency; Estonia offers e-citizenship. British journalist and Liberal Democrat parliamentary candidate Edward Lucas became its first e-citizen.

Consumer migration to the web has resulted in better products that cost much less, from the post-office to electronic mail, from taxis to Uber and Lyft, from maps to GPS. Srinivasan accordingly recommends a similar migration of political states to the cloud.  Srinivasan is inspired by the founder of Zionism, Theodore Herzl, as a political entrepreneur whose vision led to a (indeed the) startup nation. Similarly, Srinivasan wants political startups to be founded on the basis of preexisting geographically distributed communities. Cloud communities, he believes, should share common goals or at least an innovative moral principle. Unlike philosophical liberals, Srinivasan does not believe states should be constructed on the basis of some abstract notion of human beings and organized according to universalizing constitutional norms. Like communitarians, he argues that the networked communiy should represent pre-existing communal values. This community, he argues, would start with crowd funding followed by the creation of a cryptocurrency, electronic passports, encrypted keys for the citizens to access their state, and blockchains that register the state’s data.

“In practice, we say that a user has consented to be governed by a startup society if he has signed a social smart contract that gives a system administrator limited privileges over that user’s digital life in return for admission to the startup society…. Signing the social smart contract is… taking conscious risk with an on-chain asset in return for admission to a digital ecosystem.”

The sovereignty of network states would be founded on the cryptographic private keys of the administrators, so hacking those codes would constitute an invasion. What would constitute diplomatic relations between networked states would be mutual recognitions of protocols and formats. Networked states might have different regimes, such as democratic, corporate, theocratic or dictatorial, so long as a right to exit and take one’s cryptocurrency is respected in this prospective age of “pax Bitcoinica.” “Post-Satoshian network states will be limited in control to people who’ve opted into their network,” according to Srinivasan. Political competition would encourage diversification and innovative experimentation.

Srinivasan’s refounding of the state on an explicit contractual, non-territorial basis is not a new idea, despite his reliance on cutting-edge technologies. Well before Srinivasan, the economist and botanist Paul-Emile de Puydt had laid out, in an article published in Brussels in 1860, the concept of non-territorial states founded on explicit social contracts. De Puydt called this new concept Panarchy. De Puydt’s article reads as if it was written yesterday because in1860, Belgium was a divided society between Flemish and Walloons, Republicans and Monarchists, Liberals and Conservatives, Catholics and Protestants. As in today’s America, a territorial division within Belgium was impossible because the communities were mixed geographically. De Puydt wanted to found a political order that allows people with radically different values to live together, and avoid a civil war. He suggested that alternative non-territorial states could coexist on the same physical territory on the basis of explicit social contracts-constitutions. In theory, low exit costs would facilitate competition between states over customer-citizens and thus result in better political services.

Moritz Schlick, the Viennese philosopher and founder of Logical-Positivism, came to similar conclusions in his posthumously published book Natur und Kultur (his life cut short when a deranged student murdered him in 1936). Schlick was inspired by late-Habsburg ideas for non-territorial national autonomies. The Czech dissident Václav Benda in 1978 envisioned a “parallel polis” of dissident communities to the late totalitarian state. More recently, political economist and data scientist Trent MacDonald has published a book examining non-territorial states as efficient forms of unbundling, similar to switching from paying cable companies for bundles to paying for individual streaming services. More poetically, China Miéville has published a science fiction novel The City and the City, about two cities that coexist in the same geographical space but whose residents learn to “unsee” each other in shared “crosshatching” streets. Gian Piero de Bellis founded a panarchist archive in the Swiss village of St. Imier. Together, we co-edited an anthology about panarchy.

Srinivasan’s networked state differs from classical panarchy in his preference for network states to take physical forms as non-contiguous archipelagos. This distinction is comparable to the difference between internet and retail banks. An online bank can be stored on different servers; it has no particular physical location, and therefore is difficult to physically target. For example, it would be close to impossible to bomb the MasterCard financial network, whereas a series of retail banks with physical locations could be physically targeted.

To borrow a phrase from insurance law, networked states and their citizens may be “alluring hazards” for legacy states. They may find it irresistible to inflict on them what China is doing to Hong Kong, or what political majorities have been doing to commercially successful minorities throughout history. Visibility can be a vulnerability. Invasions and theft may be legitimized by accusing network states of colonialism, money laundering, tax evasion, or narco-trafficking.

Srinivasan considers two solutions to this potential problem: The classical panarchist “nonviolent digital defense through secrecy, pseudonymity, decentralization, and encryption,” is the first; alliances with nation states is the second. But such alliances would require either a common enemy, or money laundering and tax evasion services for elites of traditional states.

Srinivasan hopes that big data recorded on blockchains may generate something like Asimov’s psychohistory—a predictive statistical social science and applied historical engineering—Saint-Simon’s utopia around which Asimov spun a narrative. Srinivasan proposes a cyclical, substantial philosophy of history that resembles Robert Michels’ Iron Law of the Oligarchy: victorious revolutionaries become an oligarchy and construct revolutionaries that in turn replace them, cyclically. Srinivasan’s applies this binary class theory of history to current politics: Tech networks revolt against the “establishment” of white male nepotistic and privileged, yet woke-hypocritical, media and state—what he refers to via the synecdoche, “the New York Times.” But his combination of binary distinctions with hyperboles generates inconsistencies. For example, he echoes the claim that historiography is written by the winners “to tell a story of great triumph by the ruling establishment over its past enemies.” Yet he himself protests the reduction of contemporary historiography to victimology and grievance studies. At places, his analysis deteriorated, his hyperboles turning into rants about contemporary American politics.

Still, the Network State should not be judged by criteria that apply to what it is not, a carefully argued essay in political theory. This text is a work-in-progress composed of PowerPoint presentation-style bullet points, notes for a TED-style presentation, blog entries, and tweets, some brilliant and others less so. Tech metaphors abound, sometimes they can be amusing: he calls to “debug broken society” and “git reverse it.” He also notes, “our civilization may just be like the best player in a video game so far: we’ve made it the furthest, but we have no guarantee that we’re going to win before killing ourselves.” He conceives of a competition between “political truths that you can change by rewriting the software in people’s brains, and technical truths that exist independent of that.”

Politically, Srinivasan describes himself as an “international Intermediate,” along with “American centrists, Chinese liberals, Indians, Israelis, web3 technologists, and essentially everyone from around the world that wants to avoid both the American” failed state and the Chinese surveillance state. Surprisingly, Trump considered Srinivasan for heading the FDA. More puzzling are the closer Trumpian associations of Srinivasan’s mentor Peter Thiel and his circle, including senator-elect J.D. Vance in Ohio and recent senatorial candidate Blake Masters in Arizona. What do their populist "paleolothic emotions" and mercantilism have to do with the "godlike technology" of the tech startup vanguard, to paraphrase Edward O. Wilson?

In passing, Srinivasan implies that this may be business, not politics: “Political arbitrage is essentially the same concept as buy low/sell high. You’re supporting something when it’s low and shorting it when it’s high.” An early backer has higher returns measured by political power. The analogy collapses however when applied to authoritarian politics. Putin confiscated many of the properties of the oligarchs who supported him when he was a nobody. Jeff Sessions and Chris Christie were discarded by the president despite their early obeisance to Trump. Powerful authoritarians cannot be compelled to pay dividends. The legend of the Golem may offer a technological analogy: Prague’s Jews were suffering from persecutions and over-regulation, so a rabbinical angel investor used his crypto-knowledge to build a prototype of a powerful robot that could defeat the government and deregulate the market. The Golem prototype was successful. But subsequently, the Golem proceeded to pillage and tax his creators. Fortunately, in the end, the IT Rabbi deleted the Golem’s software.

Srinivasan notes that while digital social networks and cryptocurrencies contribute to the withering away of the state, another set of technologies is facilitating the modernization of totalitarianism in China. Totalitarian states seek total control, ideally by abolishing privacy, and constantly surveilling and controlling their subjects through Bentham’s “panopticon” or Orwell’s “telescreen.” Without the technology, totalitarian regimes have had to make do with the eyes and ears of ubiquitous secret informants. The latest technology makes the snitches redundant. Totalitarian regimes can finally rely on surveillance technology to monitor all communications and movements. Furthermore, Big Data may solve Hayek’s calculation challenge for central planning, and coordinate supply chains without market prices as information signals. Technology may also mass produce the hitherto elusive non-self-interested new Soviet man–as robots. China has just announced its own digital Yuan to totally control financial transfers. As Srinivasan puts it appropriately in Hirschman’s terms, China may eliminate exit without giving voice, but still demand loyalty.

I think that these technologies still fall short of making the world safe for totalitarianism. The totalitarian elite still needs to liberate itself from its own surveillance to enjoy its privileges at home and more so abroad, and in order to transfer its capital to its children. If Big Data could have solved the calculation problem, Google and Amazon would have gotten there already. It is hard to imagine the inference of sufficiently complex algorithms that would allow planning of whole economies without pricing signals. If China replaces its workers with robots, the unemployed workers will become revolutionaries.

Srinivasan’s text is important in charting the possible radical political implications of current and emerging technologies. The political future may well be defined by the struggle between the two possible technological paths, the network state versus the totalitarian surveillance state, while older political state models become gradually obsolete.

In 1898, Srinivasan’s hero, Herzl, convened the first Zionist Congress in Basel, proclaiming that a Jewish state will be established in fifty years, if not in five. Five years later, Herzl died at the age of forty-three.  Exactly fifty years later, Israel was established. Herzl would then have been eighty-eight years old. Today, Srinivasan is forty-three years old.  He may yet make it to age eighty-eight.

Aviezer Tucker is a political theorist and philosopher. His latest book is Democracy Against Liberalism: Its Rise and Fall (Polity Press) and he is the co-editor of Panarchy: Political Theories of Non-Territorial States (Routledge).

Image: Nam June Paik, "Video Flag," 1996, Hirshhorn Museum, Washington, D.C. (Flickr: Neil R.)