The Future of Civilization: The Rise of Micro-Sovereignties

This article is an excerpt from the Shortform book guide to "The Sovereign Individual" by James Dale Davidson and Lord William Rees-Mogg. Shortform has the world's best summaries and analyses of books you should be reading.

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What’s the future of civilization? How will society be structured?

James Davidson and William Rees-Mogg contend that, as nation-states decline in the 21st century, millions of micro-sovereignties will rise to take their place. These could be city-states or even individual estates where a wealthy person gets to decide what laws apply to her own property.

Keep reading to learn Davidson and Rees-Mogg’s predictions for the future of civilization and the road they believe we’ll take to get there.

The Rise of Micro-Sovereignties

Davidson and Rees-Mogg believe that technological developments will have a profound impact on social structures in the 21st century. As circumstances change to favor small, efficient organizations over large ones, both economically and militarily, they expect nation-states and national governments to decline and ultimately disappear. Nations will be replaced by millions of city-states and sovereign individuals. During the transition, they also anticipate a general increase in crime and violence throughout the world. We’ll break down the reasoning behind their predictions for the future of civilization.

Davidson and Rees-Mogg argue that micro-sovereignties—small communities of high-productivity individuals—will be much more economically efficient than today’s welfare states. And, as conventional warfare is replaced with cyberwar, they will be just as capable of asserting and defending themselves as today’s sovereign nations.

That said, Davidson and Rees-Mogg expect that most micro-sovereignties will be formed by mutual agreement on terms of secession, rather than by revolution and military force. As national governments become increasingly bankrupt and incomes become increasingly difficult to tax, the option of selling or leasing sovereignty to individuals or other entities will become increasingly attractive. Eventually, today’s national governments will sell off or lease out practically all of the territory over which they currently exercise sovereign control.

The authors explain that, once this has taken place, there will be at least three types of micro-sovereignties.

Fulfilling the Social Contract with Micro-Sovereignties

The Social Contract proposed by Swiss political philosopher Jean-Jacques Rousseau in the 1700s provides some additional perspective on why a state might fragment into micro-sovereignties. Rousseau argued that the only ethically justifiable government was one formed by a “social contract,” a mutual agreement of individuals to join together and form a society for their common good. In Rousseau’s view, a state exists for the good of all its citizens, so a government that works for the good of some (even the majority) of its citizens but to the detriment of others is not a legitimate government. He also contends that every state eventually reaches this point, causing governmental collapse and subsequent formation of new social contracts.

When Davidson and Rees-Mogg claim that some individuals would find it beneficial to purchase sovereign control of their own lands from the national government, they imply that national governments are no longer working for the good of all their citizens. Instead, modern welfare states work to benefit some of their people at the expense of others—particularly the wealthy, who pay a disproportionate share of the taxes. Thus, based on Rousseau’s analysis, they have already lost their legitimacy. As these illegitimate states die, communities with mutual interests will form new social contracts, creating new states. And if some individuals choose not to enter into any new social contract because they have enough resources to be completely autonomous, they would become sovereign individuals.

Competitive City-States

Many micro-sovereignties will be city-states or regional governments that compete for citizens the way businesses compete for customers. Basically, they will be service providers that provide the kind of infrastructure and protective services currently provided by governments. Each micro-sovereignty will probably cater to a unique set of preferences to differentiate itself from its competitors. For example, one might advertise itself as a drug-free zone with strict regulations on pharmaceuticals, while another advertises itself as a drug freedom zone with no restrictions on pharmaceutical chemicals or recreational drug use.

(Shortform note: Davidson and Rees-Mogg may have derived their idea that competitive city-states would choose to specialize in unique services or benefits from the economic principle of market “positioning.” In theory, every unique market sector where free-market competition operates will eventually establish a clear market leader, so it’s advantageous to differentiate your product enough that you can position it as the leading product in a unique market sector. Positioning has traditionally applied mostly to private companies, but Davidson and Rees-Mogg expect that it will increasingly become relevant to nations as well.)

Most of them will probably charge their residents a flat annual fee rather than trying to tax incomes, for two reasons: First, flat rates will be more competitive, because residents will compare the cost and benefits of living in different micro-sovereignties and choose the ones that offer the best value. Second, as we’ve discussed, encryption technology will make it virtually impossible for governments to keep track of individuals’ incomes anyway.

(Shortform note: If tomorrow’s city-states have to compete for citizens the way today’s companies compete for customers, that could give rise to a variety of creative taxation systems in addition to the flat-fee taxes that Davidson and Rees-Mogg foresee. This is because, as Larry Keeley and his coauthors explain in Ten Types of Innovation, pricing structures and revenue streams are one of the 10 standard areas where companies can innovate to differentiate themselves from competitors. For example, perhaps some city-states would lease the right to monopolize sales of food or retail goods to generate income so they could operate without any tax revenue and attract more citizens.)

Sovereign Individuals

Other micro-sovereignties will be individual estates of the wealthiest and most productive individuals. As technology puts them in a position to defend themselves and their assets from crime and military aggression better than any government can, they will find it cheaper to assert their own sovereignty, rather than live by the terms of another sovereign entity and pay for protection through taxes. As such, they, too, will purchase or lease sovereign control of their own property.

What Will Sovereign Individual Estates Look Like?

Though Davidson and Rees-Mogg spend a great deal of time explaining why they expect wealthy individuals of the future to gain personal sovereignty and the advantages it would afford, they don’t provide a very detailed picture of what day-to-day life would look like for a sovereign individual. We can infer that they either felt these details were too difficult to predict with certainty, or else didn’t mention them because life for wealthy individuals wouldn’t actually look much different after gaining sovereign status.

Many wealthy people already live in gated communities, so their geographic borders would be easy to establish and probably already protected by walls. It’s not unusual for utilities like electrical power lines to cross national borders, so sovereign individuals could potentially import most of their utilities. This would obviate the need to build their own infrastructure, and individuals would probably rely on the same utility companies they used before they gained sovereignty.

And, if you’re a sovereign individual without other citizens living in your domain, you wouldn’t need law enforcement or judicial capabilities. So perhaps the difference between being a wealthy citizen and a sovereign individual would be little more than a change in billing structure: You lease sovereignty for a flat rate instead of paying income taxes, and maybe you pay your utility bills a little differently too.

Cyber-States

Some online communities may exercise powers similar to those of a sovereign state without controlling any physical territory. For example, they might make their own laws, offer judicial services to settle disputes between their members and defend their members from other governments that might threaten them.

Are Platforms a Stepping Stone to Cyber-States?

Although today’s tech giants make no claims of holding sovereign nation status, they arguably already bear some resemblance to the cyber-states that Davidson and Rees-Mogg describe. For example, platforms like YouTube already have community guidelines and terms of use that could be seen as cyber laws applicable to their users. They also have internal mechanisms for resolving disputes, such as copyright claims, which perform a function similar to courts.

Platforms enforce their rules and rulings through mechanisms like demonetization and deplatforming, which can be financially devastating to users who’ve built a business on the platform and depend on it for income. For example, Jason Ethier may have lost over half a million dollars of annual income when his YouTube channel was demonetized in February of 2020.

Most platforms also make it much easier to conduct business with other users on the platform than with people on other platforms, creating virtual borders and barriers to cross-platform that can have a similar effect to the restrictions countries impose on imports and exports. To address concerns that this gives large platforms an unfair advantage in the market, the EU recently passed a law requiring platforms to open up their borders, so to speak: They will be required to provide cross-platform functionality of certain services, ensuring fair market competition once the law takes effect. It remains to be seen if they will actually comply, as enabling cross-platform interoperability will be extremely expensive, both in terms of up-front development costs and lost profits.

Davidson and Mogg might predict that this conflict of interest between tech giants and EU regulators will create an escalating power struggle in which the big tech companies will eventually declare their platforms sovereign cyber states, obviating any obligation to comply with national laws.

Transitional Violence

Davidson and Rees-Mogg hope that the era of micro-sovereignties will ultimately be one of greater peace and individual freedom than the era of nation-states has been. As we’ve discussed, they also expect most micro-sovereignties to be born out of peaceful treaties rather than violent revolutions. But they warn that during the period of transition from nation-states to micro-sovereignties, there will likely be an increase in crime, terrorism, and other acts of violence throughout the world.

This is because one of the functions of government is to deter crime by providing law enforcement services. As national governments fall apart, law enforcement services will break down, removing this deterrent to crime.

Meanwhile, a lack of funding will oblige welfare programs in welfare states to reduce or suspend benefits at a time when many people will see their real income decreasing. The authors expect low-skilled office workers to take the largest loss: Many of them hold positions that provide comfortable middle-class income, but they will be replaced by virtual assistants.

Some of these people may become desperate enough to turn to crime as an alternate source of income. Others may resent the social and technological developments that cost them their livelihood enough to engage in terrorism or violent protests.

And, still other people will see the social and governmental transitions as something that must be resisted to preserve nations as a matter of principle. The authors assert that national identities are somewhat arbitrary, but are still an object of loyalty for many people. So nationalist ideology will also drive opposition to change, and some of the opposition will likely rise to the level of terrorism or paramilitary aggression.

Preparing for the Transition

If Davidson and Rees-Mogg are right, there will be a period of time in the near future when criminal violence and terrorism become more common. At the same time, government services like welfare and law enforcement may not be unavailable. When that happens, what can you do if you’re not wealthy enough to have a robotic defense network that you can activate as you declare the sovereignty of your own compound?

You can prepare for a transitional period of elevated violence much like you would prepare for any natural or man-made disaster. Basically, the goal is to make your lifestyle as resilient as possible by making sure you have backup sources of everything you need. That way you can keep your options open if outbreaks of violence disrupt the services and infrastructure that you would normally rely on.

Specific needs for which you should consider backup options include food, water, medicine, commodities like toilet paper, sources of heat and electricity, means of communication and transportation, and security measures. Some of these, like food and medicine, you can easily stockpile, giving you reserves to draw from in an emergency. Others, like electricity and transportation, might require a little more investment or creativity to build in backup options. But there are still ways to address them, such as installing solar panels on your roof.

Exercise: Assert Your Sovereignty

As we’ve discussed, the authors make a number of predictions about technological developments and resulting social changes that they expected to take place in the first part of the 21st century. Most of their predictions have not been fully realized yet, but this exercise will give you a chance to think about how you could take advantage of them when and if they do come about.

Imagine that for a trivial fee, you can hire an AI virtual assistant that is capable of performing any task that a teleworking human with advanced degrees in language, law, graphic arts, and every field of science and engineering could perform. Would you hire one? If so, what is the first task or responsibility that you would assign to it? If you wouldn’t hire one, why not?
Imagine that for a flat annual fee equivalent to about 10% of your current annual income, the government would lease you sovereign control of your current residence. As a sovereign individual, at your home, you wouldn’t have to have to pay taxes or abide by laws unless you impose them on yourself. And you can impose whatever laws you like on others who come to your home, but it’s up to you to enforce them. Would you lease sovereignty from the government? Why or why not?
Now imagine that most nations have fragmented into many micro-sovereignties, which are competing to attract (or keep) profitable businesses and productive individuals. The city in which you live has just been granted sovereignty and has called for public input on its policies going forward. What one thing (law, program, problem, and so on) would you recommend that they make their top priority to change, implement, or improve?

The Future of Civilization: The Rise of Micro-Sovereignties