Governments today face largely the same problems as businesses. The key challenge everywhere is not to downsize per se, but to compete more effectively by delivering the highest value for whatever they charge, in an environment where people increasingly have more say as to whether they're willing to buy it at all.
Consider a world where each of us in fact could just "buy" the government we want -- not the old-fashioned way, with a bribe to a well-placed official or a hefty campaign contribution to a politician, but the way you'd buy a new consumer product.
You would select the size and capabilities you want from a producer you chose. Of course, it would probably come with some annoying features you wish you could eliminate but are included anyway, either because others tend to want them or the provider itself just thinks they're good for you. Isn't it that the way with government -- not to mention several major high-tech companies?
Once you bought the model of your choice, you'd be able to tailor its use to your needs. It would help improve your quality of life, increase your productivity, provide valuable information -- and you'd be able to use it just about anywhere. You'd be able both to send and to receive information, to share with others, to follow the crowd or go your own way.
Alternative products might also pop up from time to time, requiring the government you purchased to update its product and services, or lower its prices, or perhaps even provide better customer support. And being at the cutting-edge, your government would be functional, streamlined, and -- perhaps coolest of all -- it wouldn't force you to indicate your choices through those old-fashioned buttons with arrows pointing left or right. Instead, you'd be able to command it by rotating through a variety of positions and going in whatever direction best suited you -- like the control wheel of an iPod.
Sound bizarre? Perhaps, but I believe this sort of "iPol" is coming soon to a world near you.
The modern nation-state is one manifestation of "government," and its dominance has conditioned us to think of the two as synonymous. But the provision of governance has long been available from entities other than the state, and territory-less "governments" -- from churches to the mafia to colonial-era "extra-territoriality" treaties -- have long governed many aspects of their "citizens'" lives far more effectively than the state in which they physically live. This is true of many private businesses, as well: Facebook has many of the attributes of a government (and "an approval rating close to that of the IRS" to show for it).
At the same time, Facebook is part of a larger tech phenomenon reducing the importance of place in human interactions: You can create your own electronic community on Facebook, while virtual worlds like Second Life have their own governments, economies, and currencies. Commercially available virtual government cannot be far behind.
Governments in fact have been facing non-virtual commercial competition for quite some time -- and losing. Businesses and wealthy individuals are turning increasingly to private-sector alternatives to what has long been regarded as government's primary (if not sole) function -- public safety. There are more private security guards than police nationwide, to say nothing of gated communities and citizen patrols. The trend is the same in primary and secondary education, long viewed as fundamental governmental responsibilities in this country. Not surprisingly, as people turn to private-sector alternatives, their willingness to pay for (arguably inferior) governmental products wanes: Americans have "withdrawn" from traditional governmental services where they have found more attractive alternatives. The range of areas in which private alternatives to government services may spring up is almost limitless. As Foreign Policy observed, as soon as former Secretary of State Hillary Clinton defined her strategy as building up American "smart power," "Defense contractors soon look[ed] to cash in, building their portfolios in health and human rights."
Health care for the world's poorest and human rights for the oppressed as private-sector businesses? Where there's money to be made, a commercial alternative will emerge. But core state enterprises are subject to increasing non-commercial competition, as well. Many in southern Lebanon willingly receive social services and other incidents of modern government from the terrorist group Hezbollah rather than from the official government. Al-Qaeda presents many Islamic radicals with an even more extreme -- and arguably more effective -- non-territorial alternative to the nation-state for purposes of waging war.
A world of "government" that people can opt in or out of as they choose will offer all sorts of new challenges and opportunities such as virtual dual citizenships and virtual dual jurisdictions, all based on a market for "virtual states" -- far less territorial even than Delaware's innovative corporate laws -- that you could buy anywhere. These eventually will offer new solutions to geographic conflicts -- at the same time that they are creating greater potential for such conflict.
The ability to opt out of the state in which they are located physically and reconstitute themselves in other, virtual states, is just one facet of the increasing democratization technology is bringing. It is also democratizing another kind of power -- the power of destructive force -- and that makes the emerging "virtual state" (or "virtual caliphate" to some minds) a threat as well as a promise. New technologies may dramatically lower the difficulty and cost of enriching uranium, making nuclear bombs available to almost any group large enough to constitute itself as a "state." But why focus on just weapons of mass destruction? Today, as the Boston Marathon bombers demonstrated, almost any individual can conjure up and use greater destructive power than most governments possessed a century ago, using only common elements from a hardware store. An individual hacker can cause billions of dollars of economic damage around the world in a few days with a well-constructed virus. We could face the specter of a world of countless "virtual states" with massive destructive power. This is certainly what the terrorists envision.
The short-term answer, of course, is to respond with the traditional tools and weapons of statecraft, from destroying terrorist "armies" to hardening our own targets to diplomacy to alleviating poverty and ignorance. But what is the state's long-term response to this challenge? Ironically, it is to beat virtual states by joining them, as the nation-state is likely to do over the next half-century. In fact, the United States is already well on the way -- one reason the old-fashioned nation-state represented by the U.S. is faring fairly well against the "netwar" of al-Qaeda and its ilk.
Sure, the United States can bring to bear overwhelming force in the world of places and things, but we also possess an equally important virtual advantage: American culture and values are now diffused throughout the world. Most of the world aspires to drink Coca-Cola, wear Levis, watch Hollywood movies, listen to rock music, and achieve the lifestyle these represent. They want to study and work in our universities and cutting-edge industries, and live -- whether at home or abroad -- under American values of freedom, democracy, and due process of law. American culture and values represent successful "products," and as these are ever-more-broadly dispersed -- as global politics, economics, even self-definitions become less about physical ties and more, well, virtual -- attacking physical manifestations of nationhood will be less and less meaningful in the long term. In strategic terms, this is the opposite of "hardening" our targets -- instead, making them more ephemeral and diffuse -- but it has the same effect: rendering physical attack pointless in the long term. Neither side in this conflict will prevail solely by bombing the other's people or territory. To succeed against the world of virtual competitors, traditional states will need not simply to beat them but also to join them.
Ultimately, then, the world today presents a much broader, evolving, and more competitive marketplace for governmental services. Governments had better get used to it. And if they do, they might just be giving the private sector and other non-state actors a run for their money in a whole new way.