Small Nations in a Big World E-Book

Michael Keating

• Herausgeber: Luath Press
• Kategorie: Geisteswissenschaft
• Serie: Viewpoints
• Sprache: Englisch

Seitenzahl: 264

Veröffentlichungsjahr: 2014

Beschreibung

Small northern European states have been a major point of reference in the Scottish independence debate. For nationalists, they have been an 'arc of prosperity' while in the aftermath of the financial crash, unionists lampooned the 'arc of insolvency'. Both characterisations are equally misleading. Small states can do well in the global market place, but they face the world in very different ways. Some accept market logic and take the 'low road' of low wages, low taxes and light regulation, with a correspondingly low level of public services. Others take the 'high road' of social investment, which entails a larger public sector and higher taxes. Such a strategy requires innovative government, flexibility and social partnership. Keating and Harvey compare the experience of the Nordic and Baltic states and Ireland, which have taken very different roads and ask what lessons can be learnt for Scotland. They conclude that success is possible but that hard choices would need to be taken. Neither side in the independence debate has faced these choices squarely.

Leseprobe

MICHAEL KEATING is Professor of Politics at the University of Aberdeen, part-time Professor at the University of Edinburgh and Director of the ESRC Scottish Centre on Constitutional Change. He has a BA from the University of Oxford and in 1975 was the first PhD graduate from what is now Glasgow Caledonian University. He has taught in several universities including Strathclyde, Western Ontario and the European University Institute, as well as universities in Spain and France.  He is a Fellow of the British Academy, the Royal Society of Edinburgh and the Academy of Social Sciences. Michael Keating is the author or editor of over 30 books on Scottish politics, European politics, nationalism and regionalism. Among his recent books are The Independence of Scotland (Oxford University Press, 2009) and Rescaling the European State (Oxford University Press, 2013).

MALCOLM HARVEY is a Researcher in Politics at the University of Aberdeen and the ESRC Scottish Centre on Constitutional Change. He has a BA in from the University of Stirling, an MSc from the University of Wales, Aberystwyth and his PhD is in the final stages of completion. He has taught at the universities of Aberdeen, Stirling and Strathclyde on subjects including political theory, British politics and nationalism. He has previously written for several online outlets, including Better Nation (as co-editor) and the Herald, and is an active Twitter user (@MalcH). His work has recently been published by the National Institute Economic Review and the British Politics Review. This is his first book.

Luath Press is an independently owned and managed book publishing company based in Scotland, and is not aligned to any political party or grouping.

Viewpoints is an occasional series exploring issues of current and future relevance.

Small Nations in a Big World

What Scotland can learn

MICHAEL KEATING and MALCOLM HARVEY

LuathPress LimitedEDINBURGHwww.luath.co.uk

First published 2014

ISBN (PBK): 978-1-910021-20-0

ISBN (EBK): 978-1-910324-09-7

The authors’ right to be identified as author of this work under the Copyright, Designs and Patents Act 1988 has been asserted.

© Michael Keating and Malcolm Harvey 2014

Contents

List of FiguresList of Tables

Acknowledgements

CHAPTER 1  Introduction

CHAPTER 2  The Size of States

The Time of Big States

The Moral Worth of Nations

The Advantages of Being Big

Other Histories

Global Imperatives

CHAPTER 3  Small is Beautiful?

The Return of Small States

Reductionisms

The Civic Nation

CHAPTER 4  The High Road and the Low Road

The Competition State

The Liberal Market Model

The Social Investment State

The Evidence

CHAPTER 5  Adapting to Change

Strategy

Corporatism

From Corporatism to Concerted Action

Institutionalising Cooperation

Cultures of Concertation

The Battle of Ideas

From Corporatism to Governance?

The Importance of Government

Playing the European Game

Variations

CHAPTER 6  The Nordic Zone. Social Democracy in Changing Times

The Historic Roots of the Nordic Model

The ‘Golden Age’ of Social Democracy

Economic Crises

Adapting the Model

Divergence in the Nordic Model

A Twenty-First Century Nordic Model?

Still Social Investment States?

Conclusion

CHAPTER 7  The Baltic States. The Market Liberal Road

Transitions

Declaring Independence

Economic Transition

(No) Social Partnership

Underdeveloped Welfare Systems

From Contraction to Baltic Tiger

Europeanisation

The Crash

CHAPTER 8  Ireland. A Hybrid Case

Irish Backwardness

Modernisation

Social Partnership

Europeanisation

The Celtic Tiger

The Crash

CHAPTER 9  How Does Scotland Compare?

The Choice of Roads

Where Stands Scotland Now?

A Social Democratic Scotland?

The Independence Prospectus

Government

Policy Communities

External Relations

Telling the Story

Is Independence Necessary?

The Future of Scotland

Glossary

References

List of Figures

FIGURE 4.1  Public spending, percentage of GDP (2007 and 2012)

FIGURE 4.2  Effective rate of corporation tax (2012)

FIGURE 4.3  Top marginal income tax rate, percentage (2012)

FIGURE 4.4  Value Added Tax (VAT) rates, percentage (2012)

FIGURE 5.1  Trade Union Density, percentage of workforce

FIGURE 6.1  Tax Burden, percentage of GDP (Nordics)

FIGURE 6.2  Total spending, percentage of GDP (Nordics)

FIGURE 6.3  Social spending, percentage of GDP (Nordics)

FIGURE 6.4  Unemployment rate (Nordics)

FIGURE 6.5  Nordics GDP per capita 2004–11 (US$)

FIGURE 7.1  Tax burden, percentage of GDP (Baltics)

FIGURE 7.2  Total spending, percentage of GDP (Baltics)

FIGURE 7.3  Social spending, percentage of GDP (Baltics)

FIGURE 7.4  Unemployment rate (Baltics)

FIGURE 7.5  Baltics GDP per capita 2004–12 (US$)

FIGURE 8.1  Total spending, percentage of GDP (Ireland)

FIGURE 8.2  Tax burden, percentage of GDP (Ireland)

FIGURE 8.3  Social spending, percentage of GDP (Ireland)

FIGURE 8.4  Unemployment rate (Ireland)

FIGURE 8.5  Ireland GDP per capita 2004–12 (US$)

List of Tables

Table 4.1  GINI coefficient

Table 4.2  Indices of Wellbeing

Acknowledgements

The work on which this book is based was supported by a Senior Fellowship awarded by the Economic and Social Research Programme under its Future of the UK and Scotland programme. It has benefited greatly from discussions with colleagues on the programme. We are grateful to academic colleagues in our case-study countries for advice and ideas. In Denmark, Peter Thisted Dinesen, Ulrik Pram Gad, Bent Greve, Sara Dybris McQuaid and Peter Nedergaard. In Estonia, Kairit Kall, Anu Toots and Karsten Staehr. In Ireland, Frank Barry, John Coakley, Tom Garvin, John Geary, Niamh Hardiman, Rory O’Donnell, Joe Ruane, Jennifer Todd and Christopher Whelan. In Latvia, Jānis Ikstens, Feliciana Rajevska and Liga Rasnaca. In Lithuania, Jonas Čičinskas, Liutauras Gudžinskas, Vytautas Kuokštis and Ramūnas Vilpišauskas. In Norway, Elin Haugsjerd Allern, Harald Baldersheim, Nic Brandal, Øivind Bratberg, Tore Hansen, Ottar Hellevik, Axel West Pedersen and Dag Einar Thorsen. And in Sweden, Carl Dahlström, Jonas Hinnfors Jon Pierre and Bo Rothstein.

Officials in government and civil society have helped us with ideas, reflections and experiences. As they were interviewed off the record, they must remain anonymous, but we are grateful.

Our work on Scotland’s constitutional future continues with ESRC support in the Scottish Centre on Constitutional Change.

CHAPTER 1

Introduction

IN SEPTEMBER 2014, Scots will vote on independence. The question on the ballot is, in appearance, simple and clear: Should Scotland be an independent country? Yet, while the words may be admirably concise, the deeper meaning and implications are not. For ‘black letter’ lawyers, independence is something that a country does or does not have. With independence, it can pass its own laws and is in control of its own destiny. Some of this comes across in the Scottish Government’s (2013) white paper on independence, which several times makes the point that: ‘Independence means that Scotland’s future will be in our own hands.’ Yet being formally independent does not mean that a nation is fully in command of its own destiny. In the 1950s, former home rule enthusiast, and wartime Secretary of State for Scotland, Tom Johnston remarked:

For many years past, I have become, and increasingly become, uneasy lest we should get political power without our first having, or at least simultaneously having, an adequate economy to administer. What purport would there be in getting a Scots Parliament in Edinburgh if it has to administer an emigration system, a glorified Poor Law and a graveyard.

JOHNSTON, 1952: 33

These dilemmas are even more acute in today’s globalised world, where nations may gain independence but power always seems to be somewhere else – in the European Union, NATO, the World Trade Organisation, with big corporations or in the anonymous discipline of the market. Yet there are examples of small nations doing very well in global conditions, adapting to external constraints while not being imprisoned by them. Indeed, small countries might even have advantages over their larger neighbours.

At one time, the Scottish National Party (SNP) was so convinced of the virtues of small northern European states that it coined the phrase ‘arc of prosperity’ to describe them. With the financial crash of 2008 and its devastating effects in Ireland and Iceland, unionists turned the example on its head, talking of the ‘arc of insolvency’. Both metaphors were profoundly misleading. Small northern European states have adapted to global pressures in very different ways. Some of them were hit hard by the crisis while others came through it rather well. It is not being small that makes the difference but the way in which a country copes with it. In this book we explore the different ways in which small states adapt and draw some lessons for Scotland.

During much of the 20th century, large states seemed to represent the future, as we show in Chapter 2. They could command large resources, look after themselves in the world and secure big markets and economies of scale. Changes in the world economy and the rise of transnational bodies like the European Union, the World Trade Organisation and NATO, however, have eroded some of the advantages of large states, since they can provide the security and market access that small states need. In a turbulent world, small states might be more flexible, with shorter lines of communication and able to adapt more easily, an argument we examine in Chapter 3. This is not, as some recent contributions would have it, because they are ethnically homogeneous or because everyone in them shares the same policy preferences. A nation is not an ethnic bloc but a political community, in which social and economic compromises can be worked out and common interests brokered.

It is not true, as some prophets of globalisation have proclaimed, that there is only one way of adapting to the changing world. On the contrary, small states have adopted a variety of strategies, as we show in Chapter 4. For the sake of clarifying the argument, we identify two key strategies for adapting to the changing world. The market liberal strategy involves accepting the logic of global markets and seeking to become more competitive by cutting back on the state, bringing down taxes on firms and wealthy individuals, and deregulating labour and product markets. In this way, investment will flow in and prosperity will be secured. This might work in some ways in an underdeveloped economy desperate for inward investment. In a developed welfare state, on the other hand, it implies cutting back on social provision, since you simply cannot cut taxes and maintain services at the same time. Such cuts can not only be socially damaging but might even undermine the public goods such as education, on which the productive economy depends. The alternative strategy is the social investment state, in which public expenditure is seen as a contribution to the productive economy rather than a drain on it. The inescapable corollary of this approach is that taxes will be higher.

The social investment approach has a lot of appeal in Scotland. There are references to it in the independence white paper, and it underlies much of the work of the Jimmy Reid Foundation’s Common Weal trades unions (STUC, 2012) and the voluntary sector (SCVO, 2013). There are, however, different varieties of it, which may be more, or less, egalitarian and social democratic. None of them should be seen simply as policies that governments can adopt at will but depend for their realisation on the right institutions, an issue we explore in Chapter 5. Many small European countries have used forms of social partnership to get both sides of industry and other groups on board, negotiating key deals and thinking in the long term. Governments need to be more innovative and adaptive, and also need to think for the long term.

Chapters 6, 7 and 8 examine the contrasting experiences of the Nordic countries (close to the social investment state) and the Baltic states (closer to the market liberal model), and of Ireland, which has attempted a hybrid of the two. The lesson is that it is difficult to pick and choose, or to combine, elements of different models at will, since each has its own logic.

Chapter 9 asks whether Scotland has the preconditions for the social investment approach. The answer is mixed. Scottish policy making is characterised by the engagement of groups and government has sought to make itself more strategic, but Scotland lacks the broad social partnership that characterises many successful small states. So external change in the form of independence would need to be matched by considerable internal change before it is fully equipped to face global challenges. There is a broad commitment to the social investment model in its social democratic variant, but a reluctance to pay for it. These questions have not been fully addressed in the referendum campaign. The No side systematically portrays every aspect of independence as negative, while the Yes side seeks to avoid choosing between different models of political economy, trying to combine market liberal and social democratic modes.

The work on which this book is based was supported by a Senior Fellowship awarded by the Economic and Social Research Programme under its Future of the UK and Scotland programme. Our work on Scotland’s constitutional future continues with ESRC support in the Scottish Centre on Constitutional Change.

CHAPTER 2

The Size of States

The Time of Big States

THERE HAS BEEN Atransformation of thinking about the size of states over recent decades. During most of the 19th and 20th centuries, mainstream social scientists and historians tended to believe that the large, consolidated nation-state was both good for economic, social and cultural progress and historically inevitable. Arguments about moral worth, economic efficiency and solidarity were piled upon each other to praise the big and condemn the small. In the 21st century, there is altogether less certainty. The nation-state is itself in question, pressured from two sides. Power drifts up to international and supranational institutions, notably the European Union, which is not quite a state but more than an international organisation, and downwards to local and regional levels. Small states have not disappeared but have proven resilient and are often doing rather well. Into this changing geography of power have stepped nationalist movements in Europe’s ‘stateless nations’, making their own claims for self-government, which may or may not entail setting up new states. This has provoked some reflection on the size of nations and states in the emerging, complex and multilevel Europe.

The Moral Worth of Nations

Nobody can suppose that it is not more beneficial for a Breton or a Basque of French Navarre… to be a member of the French nationality, admitted on equal terms to all the privileges of French citizenship… than to sulk on his own rocks, the half-savage relic of past times, revolving in his own little mental orbit, without participation or interest in the general movement of the world. The same remark applies to the Welshman or the Scottish Highlander as members of the British nation.

JOHN STUART MILL (1972), On Liberty

There is no country in Europe which does not have in some corner or other one or several ruined fragments of peoples (Völkerruinen), the remnant of a former population that was suppressed and held in bondage by the nation which later became the main vehicle of historical development. These relics of a nation mercilessly trampled under foot in the course of history, as Hegel says, these residual fragments of peoples (Völkerabfälle) always become fanatical standard-bearers of counter-revolution and remain so until their complete extirpation or loss of their national character, just as their whole existence in general is itself a protest against a great historical revolution.

FRIEDRICH ENGELS (1849), ‘The Magyar Struggle’

These two quotations, from the liberal Mill and the Marxist Engels, sum up received wisdom about the size of states in the 19th century and into the 20th. Large states were seen as an inextricable part of the project of modernity and, as they were created and consolidated in the latter part of the century, were the shape of the future. Germany, forged in 1870 from a plethora of small territories under the leadership of Prussia, rapidly powered ahead economically. Italy, united at the same time, saw rapid industrialisation (at least in the north) although its great power pretensions were never to be realised. France, its centralised and homogenised state reinforced during the Third Republic, remained a beacon for other European nation-builders. There were, to be sure, counter-movements in Spain (Catalonia, the Basque Country) and the United Kingdom (Ireland) but much liberal opinion, together with historians, tended, with Mill and Engels, to regard these as relics of a past age, as last stands against modernity.

Liberals might make exception for liberation movements within the great empires of the Habsburgs and Ottomans but even in their case there was a certain contempt for small polities fragmenting the political space. After the Second World War, they could support anti-colonial nationalist movements, but these were cases apart. From the early 20th century, the term ‘Balkanisation’ was used pejoratively to describe the proliferation of small states based on ethnic groups and their inability to live together. Sometimes this represented a rejection of nationalism for being divisive and against liberal cosmopolitan. More often, it was used to underpin a distinction between good and bad nationalisms. The nationalism of large states is, according to this reading, a civic one, based on patriotism, civil rights and attachment to institutions, while small-state nationalism is an ethnic one, based on fictive history, blood lines and exclusion. Echoes of this are still found, in the works of the late Marxist historian Eric Hobsbawm or the sociologist and politician Ralph Daherndorf. The latter remarked that, while localism might be desirable, the nation is something else:

It is possible to counteract the simultaneous pressures towards individualisation and centralisation by a new emphasis on local power. The word ‘local’ is deliberately chosen. Nations within nations – like Wales, or Quebec, or Catalonia – do not have the same effect. They may contribute to a general sense of belonging, but as a principle of social and political organisation they divide and produce unhelpful rigidities (Dahrendorf, 1995).

More recently, Joseph Weiler (2013) has condemned Catalan nationalists (including Scottish and Basque ones in the general criticism) for their:

regressive and outmoded nationalist ethos which apparently cannot stomach the discipline of loyalty and solidarity that one would expect it owed to its fellow citizens in Spain? The very demand for independence from Spain, an independence from the need to work out political, social, cultural and economic differences within the Spanish polity, independence from the need to work through and transcend history, disqualifies morally and politically Catalonia and the likes as future Member States of the European Union.

Like their 19th-century predecessors, Dahrendorf and Weiler are confusing quite different arguments. There is a longstanding distinction in studies of nationalism between exclusive or ‘ethnic’ and inclusive or ‘civic’ nationalisms. ‘Ethnic’ nationalisms appeal to questions of blood and ancestry or very restrictive cultural norms while ‘civic’ nationalisms are more open as to who belongs to the nation. Like others, Hobsbawm, Dahrendorft and Weiler assume that the nationalisms of big nation-states can be civic while those of small and stateless nations are necessarily ethnic and small-minded. In fact it is often historical accident that has converted some nations but not others into states. Both large and small nationalisms can be narrow and exclusive or broad and inclusive. Indeed there are liberal and illiberal elements within any national project. German large-state nationalism has been associated with some of the greatest crimes in history, but there is also a liberal German national tradition. Weiler’s linking of liberal Catalan nationalism to the xenophobia of the Italian Northern League makes no more sense that linking liberal nationalism in France to the Fascist tradition.

At one time it was possible to claim that big states were more progressive because they represented a step towards universalism. This claim was always questionable but has become more difficult to defend in recent decades by the process of transnational integration, notably within the European Union. It is Europe, and beyond that the world, that represents the larger space, while the nation-state stands against universalism. Faced with these challenges, established states have to defend their claims to superiority and articulate them more explicitly, hence the debates in the United Kingdom about the meaning and value of Britishness, and similar debates in other countries. State nationalism thus loses its assumed superiority and finds itself placed on the same moral plane as those of the smaller nations, or indeed of supranational institutions. If we no longer take the established large states for granted, we can ask by what moral principle (as opposed to historical accident) Norway and Portugal are independent states but Scotland and Catalonia are not. After all, Norway was, for hundreds of years, part of Denmark and then Sweden, while Portugal was for sixty years united with the kingdoms of Castile and Aragon, the basis of modern Spain.

As for the moral value of nationalisms, this is wholly unrelated to the size of the nation or whether it has a state or not. Some of them may come out well, others badly. Weiler gives no credit to the fact that Catalan, Scottish, Welsh and Basque nationalisms are more highly committed to Europe than their state counterparts. By contrast, the nationalism of the Italian political party Lega Nord, after a flirtation with Europe, is deeply Eurosceptic. Scottish nationalism is open to immigration while the Lega Nord is xenophobic and one strand of Flemish nationalism is deeply hostile to immigration and multiculturalism. Catalan nationalists have made massive efforts to include incomers into the national community while Basque nationalism has moved from an ethnic exclusiveness, which characterised its early years, to a more civic conception of the nation. British nationalism (and, even more so, English nationalism) is increasingly associated with Euroscepticism and opposition to immigration. In a longer historical perspective, big-state nationalisms have covered the whole spectrum from the ethnic exclusiveness, which was a mark of the German model, to the civic republican tradition in France. Big states have frequently been aggressive and expansionist; some small states have sought to expand their borders; and some small states have been peaceful and content within their own frontiers. Good and bad can be found in all categories.

What is striking about many of the national movements in contemporary western Europe is that, contrary to the views of big-state liberals, they do not depend on ethnic exclusivity or essential difference. In fact, they are based on exactly the same moral premises as large-state nationalism and can be assessed within the same framework. Scottish and British, Catalan and Spanish, (and likewise Quebec and Canadian) nationalisms are all founded on liberal democratic principles. Their point of difference concerns the appropriate framework within which these principles can be realised. Nationalism has turned from questions of ethnic identity to arguments about the best way to achieve social and economic outcomes. This is not to say that emotion or considerations of belonging have disappeared from the debate, but instrumental reasoning does play a larger part. One of the key issues is whether larger or smaller states are more effective.

The Advantages of Being Big

During the 20th century, it was often assumed that large states represented the future because they were functionally more efficient. At a time of expanding industry, it helped to have a large internal market and a wide range of productive activities. Germany, after the elimination of barriers (starting with a customs union and culminating with unification in 1870) was able to catch up to the United Kingdom. France eliminated internal customs after the Revolution, as did Spain in the early 19th century. By the mid-20th century, the United States attracted huge interest and envy as a continental-wide single market. The experience of Italy’s integrated market after 1870s, on the other hand, was not so positive and many people have argued that it was a mistake.

When the world trading system collapsed between the two world wars, small states were particularly badly hit, forced back on their own restricted domestic markets. Even in less drastic times, having a large and diversified internal market can help a country to weather ‘asymmetrical shocks’, that is economic problems affecting one sector or region more than others. It is not uncommon in the United States for some regions to be in recessions while others are booming. Unemployed people can then move to where the jobs are. The large federal budget evens out the impact – as incomes fall in the recession regions, taxes automatically fall as well, and their public expenditure can be maintained by the better-off regions.

It was also argued that larger states could exploit economies of scale. This applies most obviously in overseas representation, where they can afford embassies in most countries of the world. There may also be economies in domestic administration and the same number of ministries and agencies are supported by a larger number of taxpayers. Expensive items like research and development could similarly work better on a larger scale, with the burden spread.

These advantages seemed only to increase after the Second World War, when governments accepted responsibility for economic management including full employment, economic growth, price stability and regional balance. Keynesian macroeconomic management, evening out booms and busts, was best managed at a large scale, with central governments mobilising resources and freely spending money. Keynesianism relies on boosting spending at times of recession but the danger, in a small country, is that the benefit will leak abroad as citizens spend their earnings on imports. Gradually, Keynesian macroeconomic policy was complemented with an active government role in sponsoring ‘national champions’ in key economic sectors, and engaging in various forms of indicative planning in conjunction with the private sector.

Many states developed regional policies aimed at evening out the balance between booming and ailing parts of the country by diverting investment into the latter. During what the French call the trente glorieuses années (30 glorious years) (1945–75) regional policy could even be presented as a positive-sum game in which everyone could win. Poor regions gained investment and jobs, rich regions saw a reduction in congestion and sprawl, and the national economy gained from mobilising idle resources and relieving inflationary pressures. Taxpayers in the wealthy regions could take comfort from the fact that much of the money sent to the poorer areas came back in the form of orders for their goods. So within the Italian national market, a newly-employed worker in Calabria would buy a car made in Turin.

Expansion of the welfare state, looking after its citizens from cradle to grave, in the 20th century also favoured big states. T.H. Marshall (1992), writing after the Second World War, saw this as a third phase of citizenship rights, following from civil rights and then political rights. Welfare rights were rooted in a common political community, which was assumed, without a great deal of analysis, to correspond to the nation-state, which in turn was both an administrative unit and a community of belonging. It seemed logical that large states would be better at welfare as they could mobilise larger resources across large geographical spaces. Most welfare benefits, such as support for the unemployed, families and for the old, were awarded on the same criteria irrespective of local residence, and so they expressed broad solidarity. There were also more explicit mechanisms for transferring resources to local governments on the principle that rich and poor regions should be able to provide the same level of services irrespective of fiscal capacity. If one region was in trouble, it would draw down welfare support while in other times it could be a net contributor. If national solidarity was strong enough, such transfers could even be permanent rather than sporadic, the price paid for national unity. Welfare states were thus a centralising influence and both drew on, and in turn strengthened, a sense of common destiny and solidarity.

Finally, in an uncertain and dangerous world, size seemed to offer a degree of protection against aggression. Only large states could afford large armies, navies and the modern military technology of the late 19th and early 20th century arms races. Small states might rely on international guarantees but these were often swept aside, as happened to Belgium in 1914. The fate of Czechoslovakia in 1938 showed that even their supposed protector could connive in their destruction. Since the Congress of Vienna in 1815 it had been the big powers that disposed of the affairs the continent, including recognition of states, installation of monarchs and any moving of boundaries. Intellectual cover was given to great power pretensions by the geo-politics school of geographers, who believed that nations had destinies determined by their geographical location and strategic interests. Influence stemmed from size, resources and command of land or the seas, while the great powers struggled for supremacy.

Other Histories

In a longer historical perspective, however, this inexorable trend towards larger states is less evident. History has known many different types of polity, to use the neutral term that Ferguson and Mansbach (1996) employ to avoid the loaded connotations of ‘state’ (Spruyt, 1994). Over much of European space and history the dominant mode of rule has been the empire. We tend to associate this term with the colonial rule practised by western powers in the southern hemisphere in the 19th and 20th centuries, giving it strongly negative connotations. There have, however, been empires within European space, from Roman and Byzantine empires, through the Holy Roman Empire to the Habsburg, Ottoman (Turkish), Romanov (Russian) and Hohenzollern (German empires), the last three enduring until the First World War. Such empires were not, of course, democracies but then nor, until the 20th century, were nation-states. Some did, however, sustain a degree of cultural and national pluralism that nation-states, with their urge to unity, often could not. History has also seen city-states, autonomous provinces, ecclesiastical jurisdictions and trading associations such as the Hanseatic League.

The viability of various forms of polity has depended, among other things, on wider trading conditions, military technology and the balance of forces among the great powers. In the early modern period (the fifteenth to seventeenth centuries), trading city states such as Venice, Genoa, Rijeka and the Hanseatic cities, along with the provinces and cities of Flanders, could survive and prosper from their position astride trading routes. Catalonia, a trading polity embedded within the confederal Kingdom of Aragon, traded into the Mediterranean, expanding its cultural and political influence at the same time. Some small polities could mobilise their own military power (as shown by the Venetian navy and arsenal) but otherwise troops could be purchased, Switzerland and Scotland being among the main suppliers of mercenaries. Some people have imagined this to be a form of early neo-liberal free-trading market capitalism but in practice these trading ventures were highly regulated and under public control. The Italian trading states were organised around commerce while the Hanse, far from being a free-trade zone, was a cartel.

Other polities survived at the interface between great powers, playing one off against another. Scotland played England against France for centuries and survived as a polity despite the weakness of its monarchy. The Netherlands emerged in the context of war between England and Spain. Stein Rokkan (1999) drew attention to the ‘shatter-belt’ of territories that maintained their identities between the state-building projects of the great powers. Many of these were located on the trade routes of early modern times. Indeed the pattern re-emerged in 1980 when French economists developed the idea of the ‘blue banana’ of prosperous regions from – down to northern Italy – so called because of its shape on the map. Still other polities survived at the periphery of the state system, as in Scandinavia, or turned towards global empire, as did Portugal. Some have attributed the demise of these small polities to changing military technology. They could not afford the demands of 18th-century warfare or assemble the masses of troops needed. Certainly by the Napoleonic era they were defenceless as the fate of the Venetian Republic, tossed to the Habsburgs, shows.