Walter B. Wriston wrote "The Twilight of Sovereignty -- How the Information Revolution Is Transforming Our World" (Scribners' 1992) over a decade ago, before the creation of the Web and resulting popularization of the Internet. See also 1997 Replica Books version. Even in '92, the former Chairman of Citicorp anticipated many of the challenges recently described by Lawrence Lessig and others. Wriston addresses the unintended consequences of global proliferation of information technology, particularly upon national governments. Wriston observes that in the ongoing information era, all products (even 'hard' goods like steel) contain an increasing proportion of information content, making both industry and capital highly mobile, not bound by geography. He discusses his conclusion that these changes will steadily bleed national governments ("sovereigns") of their traditional power and control.
The industrial era was built to take advantage of massive economies of scale, which made industry immobile and therefore easier for governments to regulate and to tax. In the information era, intellectual capital is increasingly important, and it "will go where it is wanted," says Wriston, "and it will stay where it is well treated. It cannot be driven, it can only be attracted." Id. p. 36. This makes the information economy "intractably global," according to Wriston, partly because trade in information is global.
Also, Wriston sees knowledge workers as increasingly difficult to govern, because they consider themselves better informed than government regulators. He asserts that the power of those knowledge workers will be most evident in "those great nongovernmental institutions whose subordination to the state is essential to sovereignty as we have known it." As Prof. Lessig later wrote in "Code and Other Laws of Cyberspace," a principal channel of government authority is by working indirectly through direct regulation of those non-governmental authorities that Wriston references in "Twilight."
Wriston also sees political challenges ahead for both the developed and developing nations as television, VCRs and telephones increasingly become available in the developing world. These global media expose increasing numbers of people to a view of an alternative world with alternative forms of government they previously had no opportunity to view.
Wriston brings his perspective as an international banker to his comments about the issuance and control of currency, a traditional aspect of sovereignty that Wriston sees dramatically changing. "Increasingly," writes Wriston, "currency values will be experienced less as a power and privilege of sovereignty than as a discipline on the economic policies of imprudent sovereigns." Id. p. 59.
He suggests that the dramatic increase of trading volumes in international currencies has largely neutralized the traditional role of central banks in affecting currency values by open market transactions: the banks are no longer big enough relative to the global market to have the effect that they once had. He points to the emergence of a Eurocurrency marketplace starting in the 1930's, as a direct response to failed attempts by national governments to control interest rates during the Depression, and capital controls in the US during the 1960's. The modern ability of capital to move instantly across the globe has robbed central banks of their power, says Wriston.
Likewise, Wriston argues that nations have lost the ability to regulate the balance of trade because the global market results in products having informational and physical value added in multiple countries. He also sees a deterioration in the relevance of the statistical measures of economic activity as services and intellectual capital are underreported relative to physical production. This deterioration, says Wriston, impairs the ability of national leaders to make rational policy decisions because they lack reliable statistical data.
Wriston also criticizes traditional accounting's relevance, saying: "In an information-based economy much of what we now consider expenditure -- staff, software or marketing programs, for example -- is actually capital investment: It produces a high return and is self-financing." Id. p. 104. This underreporting results in distorted measures of other statistics dependent upon capital investment totals, he says, pointing the reader to Soshana Zuboff's "In the Age of the Smart Machine" in which that author discusses studies of the effects of automation on productivity and the role of middle managers. An information era forced by global competition places a marketplace premium upon workers' creativity, autonomy and personal judgement, says Wriston, all characteristics that make them less amenable to control by governmental bureaucracy.
As the technologies of print, broadcast and telephone sectors of information converge, national borders will lose their ability to be boundaries for information. Information that they want to keep in or out will no longer be controllable, raising risks to existing power structures, predicts Wriston. Strong cryptography becomes cheap and widespread, equalizing the power of governments and individuals, in the same was as do information systems and "logic bombs" that are developed to neutralize the threat of "smart" technology.
Global instantaneous communication between individuals, uncontrollable by sovereigns, drives nations toward individual freedom and international cooperation, argues Wriston. The spotlight of world opinion is turned on repressive governments, he claims, and both nation-states and corporations will have relatively less power, with "the frustration and inertia that sometimes accompany democracy will more and more affect the international community." Id. p. 175. Yet Wriston concludes that despite that frustration and inertia: "The new electronic infrastructure of the world turns the whole planet into a marketplace for ideas, and the idea of freedom has proved again and again that it will win against any competing idea." Id. p. 176.
Wriston's wisdom overcomes some slightly dated references to specific technology and stands up to the test of the the last decade's dramatic unveiling of his 1992 predictions in "Twilight of Sovereignty." . See also Replica Books version still in print.
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