The nation-state as protection racket

[Cain]

http://globalguerrillas.typepad.com/globalguerrillas/2009/01/protection-rackets.html

Diving into military theory (again).

A core dynamic behind the emergence of the nation-state was it's ability to run a successful protection business (aka racket).  A system that has been growing since the treaties of Westphalia in the 1600s.  The protection business is relatively simple:

   1. It is a monopoly.  It has exclusive ownership over the use of violence.  As a monopoly, it must crush all internal competitors. 
   2. It defends its monopoly from outside interests -- as in warfare with nation-state and non-state competitors.
   3. It charges the customers (individuals and businesses) within its geographical areas of control for this service.  This isn't optional.  Customers presumably benefit from this protection. 

Historically Successful Protection Rackets

So what made the nation-state formula for protection so superior to its competitors during its ascent over the last 400 years?   It's simple.  It delivered value to its customers.  Let's dive into this with a paper by Charles Tilly (War Making and State Making as Organized Crime).  He cites the economic historian Frederic Lane's simple formula for success:

    * The protection monopoly must generate tributes in excess of the costs necessary to maintain it's monopoly. 
    * The protection monopoly must generate protection rents for its customers.  The amount the customers benefit gain from the protection of their interests less the amount they pay for it.
    * Both tributes and protection rents must be positive for long term success.  Further, the nation-state that minimized protection tributes in favor of maximizing protection rents grew the fastest (historically, that was partly accomplished through economies of scale).   

The Status of Modern Protection Rackets

The protection formula broke down in the latter half of the 20th Century as the nation-state became more complex.  Key elements of this breakdown include:

    * First, the advent of nuclear weapons made full scale war impossible (van Creveld). 
    * Second, the emergence of a global marketplace with global property rights meant that the commercial interests of the nation-state's remaining customers became more powerful than nation-state's interests.  This restricted/limited warfare even more.
    * The result has been a slow unraveling of the nation-state's ability to maintain it's monopoly over violence (and much more) within and outside its geographical borders.  This has created a gap in protection at the local level into which small violent groups are now quickly converging.  Finally, there is additional evidence that the economies of scale that drove the growth of earlier protection monopolies has broken down.

What this Means

It's likely that small groups that emerge to seize local control (as in, create a TAZ), will eventually converge on the successful protection model (delineated above).  In fact, we have already seen this shift with groups as diverse in origin as the Sendero Luminoso to the Taliban to the Zetas to MEND.  These groups will be successful in so far as they:

    * Stay decentralized and cooperative (re: opposition to the state) to ensure protection efficiency.   There are few economies of scale in this environment given the leverage offered by globalization and the presence of legacy nation-states as barriers to growth.
    * Generate positive protection rents for their customers.  Deliver value.  Protection monopolies that expand into the core businesses of its customers will become vulnerable and inefficient.  Expand the business interests of customers by eliminating competition when possible and ensuring market access.  Charge competitive rates and not monopoly rents (sufficient tribute but not excessive).
    * Diversify.  To maximize potential tributes while still delivering accelerating protection rents to customers, a protection racket should expand its customer list.  This means extending protection from drug smuggling to generic smuggling (across the entire range of potential goods) to generic commercial activity (standard corporate and small business interests).  Create a vibrant local commercial environment across the entire spectrum of potential activity.

A copy of Tlly's paper is available here http://www.scribd.com/doc/2846173/Tilly-War-Making-and-State-Making-as-Organized-Crime

[Telarus]

Iiiiiinteresting.

[Cain]

I've been reading a lot of Charles Tilly lately.  One of my main areas of interest is how the state essentially monopolized non-state violence (mercernaries and pirates, who used to do all the real fighting) and how that it is reversing.

For instance, one of the reasons for the rise of mercenary armies in Europe was that it was too expensive to maintain a standing army, it was much easier to buy one, pre-made, and roll with it.  Especially due to the rules which bound feudal society, which essentially left knights with 84 days of the year they could actually fight on (so long as they didn't use: crossbows, great big spiked balls, poisoned weapons or a whole host of other techniques which also constrained them).  Equally, asking a knight to go to war on behalf of his lord meant he would make an economic loss, because he'd call up the serfs etc who worked his land.  Even looting etc wouldn't really make up for this loss.

The downside was, of course, it gave people like Albrecht von Wallenstein, or William Kidd, more power and men under arms than the kingdoms of Europe, or the colonies of North America.

Not surprisingly, the rise of modern mercenaries, private military companies, has also coincided with an increase in the cost of warfare.  Multiple studies have shown that, despite their incredible contract fees, companies like Blackwater are still distinctly cheaper to field than US armed forces. 

This also overlaps with the theory of Hedley Bull, to a degree, who argues that globalization has in effect created a new medievalism, with its overlapping non-state authorities.  The cause and effect, as well as associated processes, are still very much up for debate.

[Reginald Ret]

very interesting.


tributes = taxes right?
but what the hell are protection rents?

[The Good Reverend Roger]

Cain:  Try reading Smedley Butler's War is a Racket, if you haven't already.  It parallels this idea quite nicely.

[Cain]

I came across it before, but just read it again now.  The point about investments is, of course, highly prescient.

(link for those who haven't read it http://www.ratical.org/ratville/CAH/warisaracket.html)

Regret: he actually defines rent protection in the article as "The amount the customers benefit gain from the protection of their interests less the amount they pay for it."  In other words, if peace costs $2000 in taxes per month, but you can make $500,000 a month because its peaceful, then the system is paying off.  If, however, the system fails due to overcharging, or not protecting you as well as it claimed to...