The Rise Of The Virtual State [Hardcover]

Richard N. Rosecrance (Author)

Book Description

Publication Date: October 21, 1999

What will power look like in the century to come? ”Imperial Great Britain may have been the model for the nineteenth century,” Richard Rosecrance writes, ”but Hong Kong will be the model for the twenty-first.” We are entering the Age of the Virtual State - when land and its products are no longer the primary source of power, when managing flows is more important than maintaining stockpiles, when service industries are the greatest source of wealth and expertise and creativity are the greatest natural resources.Rosecrance’s brilliant new book combines international relations theory with economics and the business model of the virtual corporation to describe how virtual states arise and operate, and how traditional powers will relate to them. In specific detail, he shows why Japan’s kereitsu system, which brought it industrial dominance, is doomed; why Hong Kong and Taiwan will influence China more than vice-versa; and why the European Union will command the most international prestige even though the U.S. may produce more wealth.

Editorial Reviews

From Publishers Weekly

Anticipating a different model for the world in the next century, Rosecrance, a political scientist at UCLA, sets down in advance the basic principles that will govern it. He uses simple observations and logic to paint a picture of an emerging world in which ownership of land will be less important than control over processes and services, a profound difference from the system that has dominated throughout history. Since control of land has always meant control of natural resources and thus wealth, land has been the principal focus of war. This shift away from the value of land, should, the author claims, lead to fewer violent conflicts. He predicts a lighter, more fluid system of economic intermingling among countries, as well as various forms of transnational cooperation. The "virtual state" is one in which territory is no longer the prime focus of national identity. Among countries that are moving in the direction of the virtual state, Japan and Korea are relocating production abroad and retaining services at home. Switzerland is the most virtual state in Europe, he claims. Rosecrance presents an optimistic picture ("the world is making steady progress toward peace and economic security"), but he is not so much visionary as practical, seeing a real-world model for the virtual state: the multinational corporation. This analysis will likely stand up well as a grand preliminary testament to the changing nature of civilization. Illus., tables, charts, graphs. (Nov.)
Copyright 1999 Reed Business Information, Inc.

Review

[I]f Rosecrance's sunny forecast is not entirely persuasive, he offers abundant evidence for it. -- The New York Times Book Review, Robert B. Reich

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Product Details

• Hardcover: 256 pages
• Publisher: Basic Books (October 21, 1999)
• Language: English
• ISBN-10: 0465071414
• ISBN-13: 978-0465071418
• Product Dimensions: 9.3 x 6.2 x 1.1 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 3.5 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #868,041 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

38 of 51 people found the following review helpful:

1.0 out of 5 stars When does a virtual state monopolize the use of force?, November 22, 1999

By 

Albert Kessler - See all my reviews

This review is from: The Rise Of The Virtual State (Hardcover)

Rosecrance feels that China and India and a few other places are about to become mere body countries -- body and head are his terms --manufacturing goods for head countries, such as the US, which will specialize instead in services.

His argument sounds to me suspiciously like the old fungible commodities / surplus value contrast, once used to characterize The Developing World and rationalize its economic subjection to The Developed World: the low profit margins in the former's economic activities ultimately made them prey to the high profit margins in the latter's -- Celso Furtado and many others torpedoed this idea long ago.

I also find it difficult to accept that China and India et al. willingly will don the old Latin American latifundia role of becoming merely offshore manufacturing and assembly sites for US and European managerial / owner consumers. There will be resistance to this, not least from all the US and European - educated hitech entrepreneurs who now are back home in Bangalore and Shanghai setting up startups: there are some very bright folks among them, and they are not entirely ignorant of the economic history which Rosecrance blithely assumes away in his book.

So there may be more conflict than Rosecrance postulates -- _will_ be, if the US and Europeans use their current economic and political muscle to force their current world market capitalism views on the Chinese and Indians and others. President Clinton is trying this out this week (11/22/99) in Florence on the Europeans, and some among even them are balking.

The very old international law view that the essential function of The State is the monopolization of the use of force -- somebody's got to do it -- could come back into fashion, then. Rosecrance also assumes away this conflict issue: he thinks that Developed and Developing, locked into a happy dance of mutual economic dependence, somehow never will find anything to fight about, or at least will see personal loss in fighting.

This begs the question of inequality, the fatal flaw in Mercantilism and Colonialism and a number of other World Economic Orders which foundered long before Rosecrance's Virtual Statism is going to founder. I expect myself that Chinese computer design and Indian software design, and the _local_ finance and management of same, all are going to be pretty good, actually -- and those people will fight to create and keep their comparative advantages in these and other economic areas. Trade is merely warfare by peaceful means -- an equation which easily becomes reversed under stress.

The Virtual State is a good idea, but Rosecrance's formulation of it is not: the new flows of goods and services have been analyzed by others -- the issues which Rosecrance derives from this novelty are old, and their resolution is very old and not at all virtual. This is a simplistic book, uninformed by economic history. Rosecrance preaches to the choir in the US, but his ideas will play differently overseas.

2 of 2 people found the following review helpful:

4.0 out of 5 stars State-Power and the Transformation of Geopolitics, November 14, 2007

By 

Felix Maradiaga "Felix Maradiaga" (Harvard University) - See all my reviews
(REAL NAME)   

This review is from: The Rise of the Virtual State: Wealth and Power in the Coming Century (Paperback)

The end of the Cold War generated a major change in the popularity of classical geopolitics among scholars and policy makers as well as a shift to the study of globalization as the dominant feature of today's international relations. The 1990s was an outstanding platform for the revision and criticism of classical realism and the emergence of several alternative theories that focused on the changing nature of the state. As a result, the production of literature focusing of the effects of globalization upon the 21st century state is massive. The mainstream approach questions the relevance of state-centrism and territoriality as dominant features of contemporary international relations and believes that globalization makes interstate conflict highly unlikely. Lawrence E. Modisett, from the Naval War College, refers to these scholars as "post-nation-state optimists" in contrast to "post-nations-state pessimists" such as Samuel Huntington and Kenneth Waltz.

The suggestion that increasing commercial interaction between nations leads to peace, is not a new idea. Montesquieu believed that peace is the natural effect of trade. Similarly, Francis Fukuyama on his influential article --later expanded into a book-- argued that "the end of history" had arrived with the global triumph of liberal democracy. Most recently, journalists such as Thomas Friedman argue that mutual commercial interest raises the opportunity cost of war among trading partners.

Along the same line of thought, The Rise of the Virtual State: Wealth and Power in the Coming Century, by Richard Rosecrance2 is one of the most systematic attempts to explain the changing nature of state, trade, conflict and international relations from a post-nation-state optimism. He argues that in the new century, military conquest of territory will make little sense. Rosecrance "fundamentally optimistic" theory (p.24) is based on the idea that opportunity cost of invasion will be much higher than the dividends of seizing territory: "War has retained a place in international history because it enables one country to seize resources from another. If some nations did not believe the benefits of war exceed the costs, war would seldom occur. Invasions are a threat to a country because it takes away land, a valuable asset." (p. 200).

However, in a situation which seems analogous to the immediate years following the Second World War, the events that took place in New Work, Washington and Pennsylvania in September 11 of 2001, as well as the invasion of Iraq by President George W. Bush have raised several question marks on optimistic theories of international relations. In addition, China's impressive sustainable growth has raised diverse questions of whether the emergence of a new world power will be a peaceful one. Therefore, is not unreasonable to presume that some of the theories inspired by the classical realists such as of Alfred T. Mahan, Halford J. Mackinder, Karl Haushofer and George F. Kennan, among others, are not as obsolete as it was assumed in the immediate post-Cold War years.

Some of Rosecrance's ideas on "virtual states" had been previously explored in his book The Rise of the Trading State: Commerce and Conquest in the Modern World (1986) and in an article published in Foreign Affairs in 1996. Also, in the 1997 autumn review of The National Institute for Research Advancement (NIRA), Rosecrance developed general ideas that were later exposed in the Virtual State:
"It is no secret that land is no longer the principal factor of production governing economic growth. In recent years, the returns from capital, labor, and information have risen much more rapidly than those from landed assets (...) Small economies like Singapore, Taiwan, and the Special Administrative Region of Hong Kong are now downsizing their production and focusing on the performance of high-level international services."

The essence of his theory in based upon the assumption that the power configuration of the 21st century among states is less dependent on land. Therefore, major world powers of the 21st century will not be focused on physical territorial expansion, but rather on investment in people and locating production overseas while concentrating domestic energy on high level resources. By virtual state he defines a country in which, technically, "...services total as much as 80 percent of GDP and manufacturing less than 20 percent, with the reminder in primary products." (p. 227. note No. 2). Accordingly, the configuration of new world politics will be characterized by the states "emancipation from land" as capital, labor, information and knowledge acquire greater relative and strategic importance as determinants of economic success. Over the four parts of his book, Rosecrance argues that "the influential nations of the 21st century will look less like traditional Great Powers and more like Hong Kong or Singapore: small, with little military power, agriculture or manufacturing, but powerful in using managerial, financial and creative skills to control assets elsewhere." In specific detail, he shows why Japan's kereitsu system is fated; why Hong Kong and Taiwan will influence China; and why the European Union will command the most international prestige as compared to the U.S. (which will still produce more wealth).

1 of 1 people found the following review helpful:

5.0 out of 5 stars very thought provoking, July 8, 2001

By 

Mervyn Hecht (Port Grimaud, France) - See all my reviews

This review is from: The Rise of the Virtual State: Wealth and Power in the Coming Century (Paperback)

This book brought me to the recognition of a number of features current in our society and business world, and helped me to put a number of puzzling events in perspective. Just the idea that land is now less important in the economic world itself is an important revelation. I think everyone in the investment community, as well as the academic area of the author, should read this book.