Trump exposes and exploits holes in the traditional nation-state

The Ukraine scandal appears to be another case of President Donald Trump’s breathtaking inability to distinguish the public interest from his own. When viewed this way, the scandal is simply different in degree, but not in kind, from countless other instances of petty corruption throughout history: a politician using his office for personal ends.

What has garnered less attention, but may be of far greater long-term historical importance, is what the scandal tells us about the ongoing privatization of government in the 21st century: I don’t mean “privatization” in the sense of “outsourcing,” or contracting out a function to a private company that is working for and being paid by the government. Rather, I’m referring to a private entity or group exercising hitherto-sovereign governmental functions — in this case, private entrepreneurs organized around Trump’s private attorney, Rudolph Giuliani, who managed to acquire a portion of the US government’s foreign-relations portfolio all for themselves.

What we accept today as normal government functions weren’t always seen that way, and many likely won’t be in the future. This ultimately will mean a very different experience for citizens and taxpayers, who may soon receive some so-called public goods from governments in other places — like Florida, which already provides other states with online education, or Canada and Sweden, with health insurance systems that many Americans currently wish they could buy into — or purchase their safety and defense from private security guards or increasingly-ubiquitous private military companies.

This vision of a post-national world may sound strange — or even scary — but it’s already happening to a degree, and Trump’s Ukrainian caper is just the tip of the iceberg.

Over the last decade, I’ve taught graduate courses at the University of Chicago about “The Future of Government,” and organized conferences at Columbia and Brown Universities about the effects that current and emerging technologies are having and will have on government. In my view, these are largely the same effects that they have had and are having on virtually every other industry: displacing incumbents, giving rise to new competitors with different business models, undermining the importance of place, breaking service bundles apart, at once democratizing and marketizing everything they touch.

The leading example of what new technologies can do to governments is Estonia, a small Baltic state famous for putting all government activities and services online: voting, paying taxes, even the national health care system. After I wrote several articles about these arrangements, the Estonian government invited me over to have a firsthand look and took me to a motor vehicles office: No one was there — practically everyone renews online. The Estonian government has moved nearly all its operations onto servers in other countries, and plans to place them on satellites, so that the government can continue functioning even if it loses control of Estonian territory. (The Estonians fear a Russian invasion — plausibly enough that there’s even a Call of Duty module devoted to such a scenario.)

Taking this virtual nation-state to its logical extreme, Estonia offers a form of virtual citizenship that allows non-Estonian businesses essentially to subject themselves voluntarily to the country’s business taxes and regulations — among the lowest in the developed world — while gaining tariff-free entry to the European trade zone without ever really existing there.

But once Estonia can offer foreigners its business-regulatory system, what’s to keep anyone else — a nonprofit, a business, a terrorist organization — from offering other “governmental” services, freed from the constraint of physical control of territory? In fact, there are nonprofits, businesses and terrorist organizations already doing just that. There will only be more in the years ahead.

In one way, Estonia is simply the online version of what Delaware has been doing since the 19th century. But online is the key difference: It makes all these disruptive outcomes — ease of entry, lower-cost business models, simpler customer aggregation and market-making, unbundling, undermining of authority and trivializing of distance — dramatically more feasible. Before Trump’s inauguration, I noted that “governments as we know them are becoming more like companies” — real-estate and branding enterprises, at that — and predicted that this pattern would simply accelerate under a profit-obsessed real estate-and-branding magnate.

And that’s exactly what happened.

Ahead of taking office, the President-elect “jobbed out” some of his security to a private company, rather than relying solely on the Secret Service. The administration early on toyed publicly with creating a private-sector intelligence community to advise the President rather than relying on, say, the US intelligence community.

What has come to light with the Ukraine crisis is the extent to which Trump set up what is essentially a private State Department.

Of course, prior presidents have utilized “Kitchen Cabinets” or private back-channels to effect sensitive diplomacy: Rudolph Giuliani, the point-man for Trump’s private Ukrainian diplomacy, in his now-infamous “I will be the hero” rant, expressly referenced as his model James Donovan, the real-life intelligence officer played by Tom Hanks in the movie “Bridge of Spies.”

But Donovan was working in concert with, or at the direction of, government institutions — not at cross-purposes to them. And historically, such individual back-channelers have carried out specific missions — not taken over ongoing diplomatic relations. And, of course, they have generally acted in the national interests of the United States — not in the interests of a private source, which, in this case, happens to be the President of those United States.

For all intents and purposes, Giuliani and his associates represent a privately funded and privately conducted operation that uses the sovereign power of the US government on behalf of the President’s private goals.

Of course, Trump isn’t really ploughing new ground in trying to create his own private, for-profit State Department, CIA or Secret Service: Sovereignty is not a unitary phenomenon but a collection of powers that can be unbundled, and numerous countries have effectively outsourced various functions such as, for instance, their monetary policy; the British Empire went further and handed over actual governing of large swaths of the globe to the private Hudson’s Bay and East India Companies (the Dutch did the same).

The exercise of sovereign governmental functions — from money creation to war-fighting to nongovernmental regulatory powers like our current private securities rating system — by private companies or individuals (or even criminal organizations) is not uncommon. But today the phenomenon is growing: Wealthy individuals in California, for instance, are turning to private fire companies in the face of that state’s collapsing ability to contain the fire threat.

This turn toward private “governments” represents a dramatic departure from modern conceptions of advanced societies, and is part of a slowly mounting challenge to the nation-state as we know it. Facebook is creating its own currency and court system. The company’s founder, and those of Reddit and other internet platforms, have referred to their companies as, effectively, “governments.” And they are right.

Into this volatile landscape strode Donald Trump — in so many ways the beneficiary, not the author, of these long-term trends, his election the outcome and not the cause. It so happens that, at a time of increasing tendencies and opportunities for businesses and other non-state actors to offer competition or alternatives to what we think of as “government,” the most powerful nation in history chose to put in charge a man who knew nothing of governing but a lot about making everything about himself — and then monetizing it.

The world was beginning to look a lot like Donald Trump even before Donald Trump; Trump’s presidency is only making it more so. The long-term question this raises for all of us is: What’s the difference between a government “owned” by the People and one owned by just, well, people?