Foreign-Policy Implications

NOTE: The opinions and commentary expressed in this essay are those of the author and are an exercise of free speech. They do not necessarily represent the views of Free State Project Inc., its Directors, its Officers, or its Participants.

The Foreign-Policy Implications of a Free State

by Jason P. Sorens

Fiscal Autonomy

If the Free State Project (FSP) succeeded and at least one state of the U.S. became an "autonomous zone," what would be the implications for American foreign policy and the world state system in general? Obviously, if foreign and defense policy were devolved to the Free State, it would have control over its own foreign policy. However, even with mere fiscal autonomy, a Free State would have important implications for U.S. foreign policy.

What does fiscal autonomy (sometimes called "fiscal federalism") mean? In general, it means that the states or provinces in a country have full control over internal finances, and there are no cross-state or cross-provincial subsidies. Whatever is raised in taxes in a state is spent in that state. Of course, there are some areas of government spending that pertain specifically to the country level and cannot be distributed by state. Defense is one such area: it would be difficult, impractical, and unwise to allot military spending strictly according to state tax revenues. Strategic considerations, for example, may dictate that more troops should be placed on the coast or a border than in some interior region (having military bases in California or Virginia seems a better way to defend Kansas than putting the military bases in Kansas). Fiscal autonomy therefore generally refers to non-public-goods portions of the budget: welfare expenditures, social insurance, most kinds of law enforcement, schooling, etc. In a Free State, of course, many of these current functions of government would be carried out by private businesses or charities. Even if these functions are not privatized, however, the mere fact of decentralization will have important implications for the power and role of the federal government in all areas.

The Federal Government's Budget Constraint

To see why this is so, think back to your introductory economics classes and the concept of a budget constraint. In introductory microeconomics courses they show you how giving people food stamps will actually encourage them to spend money on other items as well, because money is fungible: what isn't spent on food anymore will be spent on something else. In the same way, restricting what the federal government can spend on redistribution, education, and law enforcement will result in a reduction of what the federal government spends on the military. The graph below demonstrates this.

Point A represents the tangency of the federal government's indifference curve between military and redistributive spending and the federal government's budget constraint. (An "indifference curve" is just a graphical representation of how much of one good is necessary to compensate for the loss of another good according to the preferences of the subject.) Now imagine that a Free State is created, securing fiscal autonomy from the federal government in redistributive policy. The federal government's revenues are reduced. The federal government will attempt to compensate for the reduction in redistributive spending by moving some spending from the military to redistribution (in technical economic terms, this analysis assumes that both redistribution and military spending are "normal goods" for the government). Point B is the new situation, representing a decrease in both forms of spending.

Foreign Policy after the F.S.P.

What would be the implications of a decrease in military spending for U.S. foreign policy? It is likely that unilateral war will become a less attractive option for policy makers. Currently, the U.S. military budget represents about a third of global military spending, even though the U.S. holds only about 5% of the world's population. Especially in an age of "asymmetric force" (where the greatest threats come not from states but from individuals and non-state terrorist groups), America's bulky conventional military is too large and tactically too conservative to protect Americans well. The reason policy makers favor a large, conventional military is that it still serves their purposes well: bullying leaders of foreign countries into compliance through threats of bombing or economic sanctions. These policy makers are, contrary to the popular imagination, not particularly attached to America at all but are more interested in advancing their conceptions of historical grandeur on a world stage. That this grandeur is dressed up in terminology of "democracy" and "human rights" (and even "freedom") rather than overt imperial domination does not make it any less arrogant and dangerous.

A smaller military budget would deter future missions like the bombing of Yugoslavia and the bungled invasion of Somalia. It would force policy makers to develop a more streamlined, efficient military that will be better suited toward tracking down and eliminating decentralized threats to the American people than to strong-arming the latest official villain.

A Free State would also deter an equally dangerous multilateralist interventionism that takes its cues from the United Nations. By the same logic as that presented above, a Free State would necessitate reductions in foreign aid and U.N. dues. In addition, if, as we in the FSP hope, one Free State will stimulate the emergence of others, there will be multiple centers of independent criticism of global-statist policies. In the limit, Free States with control over foreign policy would have the right to withdraw from organizations like the U.N. altogether. (However, I see it as unlikely that Free States would seek full decentralization of defense, for the reasons expounded in the second paragraph. Rather, they would likely try to remain under a common security umbrella in exchange for a yearly fee, for example.)

Another point that is worth making is that Free States would attract labor and capital from inefficient interventionist states, creating constituencies for free trade and capital mobility and encouraging interventionist states to slim down. Free States would thus have a positive long-run impact on free trade and economic globalization (which is by all means to be distinguished from political "globalism"). This trend would in turn make the entire international state system more peaceful, secure, and prosperous.

Neoconservative and establishment-liberal critics of the FSP will doubtlessly enjoy pointing out that a Free State would reduce America's conventional military capabilities. Nevertheless, this reduction would actually serve Americans better, and a leaner government in all respects would certainly make Americans' lives freer and richer. In addition, the dynamic effects of the Free State should benefit the world at large in the long run.

April 4, 2002

The views expressed in this essay do not necessarily represent those of Free State Project, Inc., its Directors, or its Officers.