The nation state is being replaced by the market state. Unlike the nation state, the market state will not see itself as more than a minimal provider or redistributor; it will simply try to maximise the choices available to individuals. But it will not take a single form any more than the nation state did. Roosevelt, Hitler and Stalin had radically different ideas about how to improve the nation's material well-being, and even about what legitimately constituted a "nation". So, too, the market state will reflect variations - in attitudes to sovereignty rather than to race, class or legal process.
One can imagine three principal versions. The first is an entrepreneurial market state. This would reflect a broadly libertarian view. It would tend to keep state intervention to a minimum and confine itself to nurturing tangible and intangible (for example, education) infrastructure. The second is a managerial market state. This would be more sensitive to egalitarianism, and it would attempt through long-range planning to give more weight to the interests of posterity. The third is a mercantile market state. This would be more consensual and more protectionist. It would attempt to maintain control over capital both monetary and human - through immigration controls, for example.
For entrepreneurial states, sovereignty is transparent, a function of the state's adherence to human rights norms; a state that wages a campaign of ethnic cleansing against its own people, therefore, forfeits sovereignty because sovereignty arises from the people. For managerial states, sovereignty is the translucent creation of international institutions and can be pierced only with the endorsement of those institutions. For mercantile states, sovereignty is opaque, and cannot be breached for any reason by any state except as a response to an attack.
The entrepreneurial market state seeks leadership through the production and marketing of collective goods that the world wants - goods such as organising humanitarian interventions, implementing anti-proliferation and pro-environment regimes, and underwriting the security of states that would otherwise have to convert their economic strength into military assets. The managerial market state seeks international power through its participation in a regional economic and political zone. The mercantile state seeks market share above all else in order to gain relative dominance in the international market; it disengages from international affairs and emphasises the renewal of community.
The world-view of the entrepreneurial state seeks to exploit nimbly the fast-moving, evanescent opportunities brought about by high technology and the global market place. Such a world provides an environment for the fullest expression of individual creativity; it rewards those who innovate and who can deal with, indeed who relish, impermanence. There are few fixed rules or taboos; competition sorts out the quick from the dead.
The world-view of the managerial state is quite different: there, governments play a far larger role in defining the common interest and using the power of government to assert that interest. Minority rights are more carefully husbanded; international institutions are maintained; protection of the environment is given a priority, accepting that all these factors may produce sub-optimal economic performance.
In the mercantile state, governments also play a large role but that role is less regulatory, more guiding and supportive. Here governments provide long-range strategic planning based on the good of the society taken as a whole - not the sum of its interest groups. Unlike managerial states, which foster regional groupings, mercantile states are more ethnocentric and more protective of their respective cultures.
Each of these basic world-views - for they are really caricatures - are held within new Labour today, and elsewhere, too. None is held in isolation to the complete exclusion of the others - nor could they be - and all must still sit within the politics of the waning nation state.
We live in nation states. Tony Blair's market-state proclivities give us a view of what the future might be like but, for now, ever-struggling nation states will continue to dominate. This is of particular importance for three elements of Blair's foreign policy: his relationship with the United States and his efforts to organise a multilateral coalition to intervene in crises brought on by humanitarian catastrophes, terrorism, or the collapse of states; his attitude towards the European Union; and his linkage of domestic and international affairs.
George W Bush, like his predecessor Bill Clinton, has offered elements of the market state to the American public on domestic issues - for example, he has frequently promised, with respect to education, "to leave no child behind", even though education has hitherto been a local and not a federal concern for Republicans.
In foreign affairs, however, Bush has only recently seemed to appreciate the changed world in which he must operate. When the US absents itself from international affairs, it makes con- flicts within regions more likely, as we saw on the Indian subcontinent and most disturbingly in the Middle East. When, how- ever, the US acts unilaterally, as with the denunciation of the Kyoto accords or the announcement of a rise in steel tariffs, it runs the risk of alienating allies and creating conflicts between regions.
Only by trying to manage international coalitions can a leader avoid these two pitfalls. Blair clearly understands this: in 1999, he spoke to the Nato council of a future where Nato could become the military arm of an international order rather than a strictly defensive alliance confined to the European theatre. He is said to have urged the use of ground troops in Kosovo, a decision that precipitated the Serbian collapse. Blair skilfully managed the run-up to Afghanistan in the face of, it is now com-monly forgotten, considerable opposition in Europe and, for that matter, America. And now Blair has run the greatest risks yet in aligning himself with the US over Iraq and thus preserving the coalitional elements that will, I am confident, ultimately lead to a resolution acceptable to the US and to the members of the UN Security Council.
Market states, with their sensitivity to non-territorial identities, are well suited for the formation of international constitutional "umbrellas". The umbrella is a free-trade and/or defence zone that allows for a common legal jurisdiction as to some, but not all, issues. To put it differently, an umbrella is one outcome of a market in sovereignty. Different umbrellas may overlap. Small societies can shelter within such umbrellas - cultures too small to be viable as separate states - retaining for themselves control over essentially cultural matters. As Thomas Jefferson wrote in a private letter, "the maxim of civil government being reversed . . . its true form is 'divided we stand, united we fall'".
Umbrellas of this kind might permit the reunion of states that were severed by the partitions favoured by nation states: India, Bangladesh and Pakistan; the Koreas; Rwanda and Burundi; Israel, Jordan and Palestine - those states, in short, whose relations with each other threaten the stability of the larger society of states. Such umbrellas offer a constitutional mechanism for ameliorating one of the most significant shortcomings of the market state, its indifference to community and culture. Under a multicultural umbrella, many subcultures can dwell, appropriating the economic and defence advantages of a larger territorial scope while retaining the ability to develop different legal regimes within each specific domain.
For Blair, this possible development tracks his course for the European Union - the creation of a liberating, more flexible structure than has hither-to been envisioned. Regional groupings can, however, be a potent source of conflict because they bundle all of the frictions among states into a single mass. If the United States faced a Europe surrounded by high trade barriers, a supranational defence force that did not require consensus with the US for its deployment outside Europe, and a political agenda based on regionalism, it is not impossible that the 21st century could again see armed violence between the great powers.
Either way, the UK will play a pivotal role in this development, acting as a link to both regions and, one hopes, as a member of more than one umbrella group spanning the Atlantic. It would be absurd for the United States to ring the Americas with high virtual walls, simply because of a geographical contiguity. At a time when physical products are less and less the dominant items of trade, it is idle to pretend that the US has more in common with Guatemala than with Sweden or the UK.
This awareness of the interconnectedness of the new strategic environment is plainly evident in Blair's speeches. In a speech in 2001, Blair developed the theme of "global interdependency" as a counterweight to regionalism. "The critics will say: but how can the world be a community? Nations act in their own self-interest. Of course they do. But what is the lesson of the financial markets, climate change, international terrorism, nuclear proliferation or world trade? It is that our self-interest and our mutual interests are today inextricably woven together."
States are losing control over their sovereignty - because of such developments as weapons of mass destruction, universal human rights regimes, transnational threats such as Aids and global warming, international capital markets, and a global communications system that penetrates borders irresistibly. Blair perceives this in market-state terms as the increasing evaporation of the barriers between the domestic and the foreign. "We are all internationalists now whether we like it or not," he said on the eve of Nato's 50th-anniversary summit. "We cannot refuse to participate in global markets if we want to prosper. We cannot ignore new political ideas in other countries if we want to innovate. We cannot turn our backs on conflicts and the violation of human rights within other countries if we want still to be secure."
As the territorial membrane weakens, the distinction between law and strategy collapses. The threats we will soon be facing are not easily categorised as state aggressions. Indeed for the first time since the birth of the state, a state structure is no longer necessary in order to organise violence on a devastating scale. And yet this development makes the role of the state all the more crucial in achieving international peace and national security. This is because only a state can achieve a successful shift from retaliatory, threat-based strategies to defensive, vulnerability-based strategies. A market can never co-ordinate defensive tactics into a strategy; it requires a state, even if it is a market state. In the new era, the state will be as indispensable to peace as it was in the past.
Finally, one should note the looming conflict in Iraq. Nation-state advocates are apt to see this interim period before Saddam Hussein is forced to leave Baghdad as depending on a quest for evidence through weapons inspection, as if he were being indicted for violation of a gun-control statute. Market state leaders are more likely to see the evidence of his intentions as already in plain view because they are more interested in the willingness to abide by agreements.
Strong states - not weak ones - will be necessary to secure the civil rights and civil liberties of their citizens. The risk is that the internationalisation of decisions - to the UN, the EU, or the World Trade Organisation - at one level, and the increasing reliance on referenda, voter initiatives, focus groups and polling at another level, threaten to weaken the governing structures of states as they change from nation states to market states. The perception of a democratic deficit fuels the anti-globalisation movement; wider protests still are likely when the issues are more sensitive. It is especially important in such a period that a state's leadership be adroit at the changing mechanics of electoral success. We may scoff at "spin-doctors" and the "perpetual campaign", but only those who have mastered the changing environment can hope to lead their societies through its difficulties.
Market states have attractive features but they also impose novel risks and costs. I am not their advocate. But I do believe they are coming, whether we like it or not, and that we need to appreciate this development if we are to deal with it successfully.
Philip Bobbitt is the author of The Shield of Achilles: war, peace and the course of history (Allen Lane, The Penguin Press)