Courtesy Reuters

The Rise of the Virtual State: Territory Becomes Passé

Amid the supposed clamor of contending cultures and civilizations, a new reality is emerging. The nation-state is becoming a tighter, more vigorous unit capable of sustaining the pressures of worldwide competition. Developed states are putting aside military, political, and territorial ambitions as they struggle not for cultural dominance but for a greater share of world output. Countries are not uniting as civilizations and girding for conflict with one another. Instead, they are downsizing -- in function if not in geographic form. Today and for the foreseeable future, the only international civilization worthy of the name is the governing economic culture of the world market. Despite the view of some contemporary observers, the forces of globalization have successfully resisted partition into cultural camps.

Yet the world's attention continues to be mistakenly focused on military and political struggles for territory. In beleaguered Bosnia, Serbian leaders sought to create an independent province with an allegiance to Belgrade. A few years ago Iraqi leader Saddam Hussein aimed to corner the world oil market through military aggression against Kuwait and, in all probability, Saudi Arabia; oil, a product of land, represented the supreme embodiment of his ambitions. In Kashmir, India and Pakistan are vying for territorial dominance over a population that neither may be fully able to control. Similar rivalries beset Rwanda and Burundi and the factions in Liberia.

These examples, however, look to the past. Less developed countries, still producing goods that are derived from land, continue to covet territory. In economies where capital, labor, and information are mobile and have risen to predominance, no land fetish remains. Developed countries would rather plumb the world market than acquire territory. The virtual state -- a state that has downsized its territorially based production capability -- is the logical consequence of this emancipation from the land.

In recent years the rise of the economic analogue of the virtual state -- the virtual corporation -- has been widely discussed. Firms have discovered the advantages of locating their production

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