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Myth of the Powerless State


Your leader entitled "The myth of the powerless state" (October 7th) made some valuable points about the continuing significance of state power in our lives but missed some very significant numbers.  

You state that public spending in the "big economies" has expanded from 36% to 40% of GDP since 1980.  But, if you take the world's economy as a whole, can you doubt that the percentage of Gross World Product (GWP) controlled by the world's states has declined since 1980.

Note the following significant changes.  1)  In both developed and underdeveloped countries, the "informal sector" has continued to grow.  You, yourself have reported that the poorest households in America spend twice their official income.  2)  The Soviet Union has gone from an almost 100% government-controlled economy to one which has a much smaller state sector.  Meanwhile informal and formal privatization in China, India, Britain, etc. have transferred vast assets to private control.  3)  The continued accumulation of offshore funds are effectively outside of the game and under no flag.  The amount of these funds is hard to estimate but has surely grown quite large.

The convergence of all of these factors suggests that, at some point in the late '80s or early '90s, the percentage of the GWP controlled by governments peaked and began to decline.  

As technology makes it easier for the financial services industry to carve its niches in the corridors of cyberspace, stateless financial assets seem sure to grow.  Since anyone can use powerful mathematics to create virtual spaces which even the largest government is powerless to enter, the percentage of GWP that the state even knows about much less controls will shrink.

Duncan Frissell