The shape of governments to come

Governments of advanced countries will always be competing with one another in order to attract the best businesses for taxation purposes — for themselves — or employment — for their electorate.. The main method is to offer lower rates of corporate taxation. But this would apply equally to all foreign companies and no government wants to be seen to be too aggressive in reducing taxation in too large stages because there are always other matters where they want to remain on good inter-governmental terms.  Other perks and ‘understandings’ can also go on quietly with individual firms.

Nevertheless, there is always on-going competition and multinational corporations are thus able to play-off one government against another. If they are immensely large corporations with large sales among the electorate — as well as offering some employment — then they can get away with hardly paying any taxes at all. They do this by establishing their headquarters in pocket-size countries elsewhere where their governments have extremely low taxation — if at all in some cases, only needing to charge office rents..

The result of all this is that, since the heyday of the nation-state — probably around 50 years ago — advanced governments have found it increasingly difficult to avoid getting into debt.  However, although so-called ‘sovereign debt’ can be held off for many years it can’t be postponed forever.  The consequence is that governments will have to slim down considerably.  In the case of the Nordic countries which hitherto had the highest levels of public expenditure, serious budgeting to that end has already started.

Ultimately they will have to slim down to the bone because business corporations will themselves be feeling the pinch with increasing global competition between themselves.  Except for the huge profits from the sales of smartphones and tablets in recent years — which is only a temporary phenomenon — narrower and narrower profit margins are already becoming the norm in the production of standard consumer goods of the advanced countries.

Automation has been with us ever since cotton spinning in the earliest Manchester factories 230 years ago.  But automation will become increasingly necessary in both governments and business corporations as competition for efficiency in both cases becomes increasingly fierce.  It is relatively easy to imagine business operations becoming smaller and smaller in the coming decades, less easy to imagine how governments will have to change. Will we have a city-state + provincial states basic structure? Or perhaps devolution into ‘mini-nation-states’? Or perhaps even further devolution into smaller towns, villages and hamlets with infrastructure sub-contracted to agencies?

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