House of War

The Westphalian state represents a relatively new equilibrium of state formation: the nation-state. According to the insight of Ronald Coase, via Douglass North, states exist and are required where transaction costs are greater than zero, and according to the insight of Charles Tilly, “war makes the state and the state makes war”. Vigorous internal and external competition amongst European states drove the evolution of the Westphalian nation-state. As a generic type, this category of state became very powerful and was able to partake of what we might describe as economies of scale of power projection. The existence of this new equilibrium raised transaction costs for other actors (for example, protecting one’s subjects from invasion became more expensive).

Therefore, non-Westphalian states have become clients of Westphalian states. Client status has affected a kind of price fixing in the international arena. The large operating costs, which the existence of the Westphalian nation-state creates, set a high barrier to entry into this market. In response, Westphalian states effectively chose to subsidise their favourite companies, reducing the influence of Schumpeterian pressure and preventing market-style competition from honing the efficiency and composition of their clients. The same hyper-competitive regional “market-mechanism” that brought forth the nation-state is unable to function.

I’m currently thinking of these newer, post-Westphalia “market barriers” as a variety of binding and non-binding price floors, in that the binding price-floors determine the market outcome, and the non-binding do not. Where a state is unable to produce (war) at the level of the price floor, it is prevented from entering the market. In the Middle East, this means that, because of Western state interventions pursuing Western state interests at the expense of Arab nationalists, regional violence is very expensive. For example, the high cost of acting against the interests of the Great Powers defeated Ali Muhammad of Egypt in the 19^th Century. Where those price floors are close to the market price, they are irrelevant. In terms of being able to administer internal violence at the discretion of the leader, Middle Eastern states have, even today, a large degree of freedom. For example, the ease with which Assad put down the Muslim Brotherhood rebellion in Hama reflects a general lack of interest and of constraint from the international order. In addition, the price floors still operate at a national level, and therefore are binding for some insurgent forces within the state. Internal rebellion is consequently more expensive and difficult to undertake. For example, the failure of the Egyptian Islamists to overthrow Nasser and Sadat was, at least in part, thanks to the patronage of the Powers, who provided the regimes with aid, weapons and other assistance.

All of this is an unfair advantage from the perspective of a “free market” where the regime and challenger compete for power and legitimacy. We have effectively institutionalised a system whereby we guarantee the state against internal overthrow but prevent the state from engaging in cross-border wars of conquest. Violence can flow downwards but not across.