This book explains what Rosecrance (political science, UCLA) foresees international relations and commerce will look like in the coming century. He depicts a world of "head" states, that use their citizens' intellectual powers to create products and manage services, and "body" states, that manufacture goods. He suggests that the great powers of the next centuries will be virtual states, not necessarily wealthy in land or resources, but powerful in using managerial, financial, and creative skills to control assets elsewhere. Annotation c. Book News, Inc., Portland, OR (booknews.com)
This intelligent book takes the time to make one strong argument well: Changes in business and technology have transformed the modern state into a virtual state. Gritty material issues like manufacturing power and territorial conquest are no longer needed in the long march to power. Instead, it's a sprint for market share in an economy dominated by what Richard Rosecrance calls "products of the mind" - "virtual" services like software, design and finance.
The good news is that it may well be a more peaceful world. Rosecrance, a UCLA professor of political science, vanquishes the specter of the 20th century's bloody wars of conquest by conjuring up the scenario of Russian troops invading Washington over the North Pole, descending upon Redmond and ransacking the Microsoft campus. This absurd notion sums up the virtual quality of the Internet Economy, where invisible assets like education, entrepreneurial infrastructure and the capacity to manage change are more valuable than the land, precious metals or food over which nations once fought.
"Microsoft and Intel are national assets, but unlike gold, they cannot be seized and manipulated for foreign purposes without their consent," he writes. These virtual states are also connected in ways that make war less and less profitable. Their success is dependent on outsourcing low-cost production, creating a world of "head" states, which focus on high-value planning and design, and "body" states, which focus on efficient production and manufacturing. And the head and body states need each other.
"The security of virtual states rests on the assumption that trade routes will be kept open and that flows of factors of production will generally not be interrupted," he writes. This profound change has big implications for global politics and the balance of power, and one of the pleasures of this book is the way Rosecrance applies his theory to different parts of the world.
He finds that the rapid transformation by the U.S. into a virtual state goes a long way toward explaining the country's enormous economic confidence - as the U.S. "has progressed most rapidly toward virtual status." It is sobering to realize that manufacturing in the U.S. now accounts for less than 20 percent of its GDP, yet it's no surprise to read that the U.S. has "excellent positions in services and intellectual property and is poised to become one of the major head nations of the virtual world," despite Rosecrance's care to avoid unseemly American triumphalism.
In this radically different world, old liabilities, such as a relatively small population with a tiny territory, suddenly become assets - turning Hong Kong and Singapore into economic strongmen. And old assets, like a large, rapidly growing population, become liabilities. Some countries are ignoring the path to virtual statehood, with traditionalists like Iraq invading Kuwait in a classic Old World land grab.
It's a relief to read prose that lacks the hysterical excitement of many writers who sing the praises of the new economy. No amazed exclamation points here. It's also a pleasure to see Rosecrance's clear-eyed acceptance of the importance of the state in helping to manage economic activity within this virtual future.
Unlike some of the more excitable proponents of globalization, he's not cheering the decline of the state in a world run by noble multinational corporations. However, he feels that national governments and politicians have less and less agency in an interconnected world in which global financial markets have increasing power. "The market and the state must work together to achieve favorable economic outcomes," he writes.
Good stuff, and fun for anyone trying to make sense of the globalization debate.
- Michael Parsons