A state which is defined by its own territorial boundaries, whose people recognise that definition, and which has sovereign power over its affairs. Smaller territorial identities within the larger territory are part of the modular, diverse composition of the nation as a complex system; they are not inconsistent with it.N31

On the scale of the nation, reciprocity is generally assumed to be “negative”—you get only what you pay for—but the strangeness of other people is mitigated. They speak the same language, are subject to the same laws, are aware of the same debates; they have some of the essentials of being of one mind—with shared jokes, allegiances, traditions and history; they live in the same political economy and participate in the same politics, which they enjoy or suffer together. There is—if only in moderation and imperfectly—good faith. There is latency—potential for closer cooperation. The nation is the setting for the fundamentals of culture and social order, for the character of society. Nations have had a bad press since the World Wars, on the grounds that they were fought between nations. They were not: they were fought between empires, which we will discuss presently.

The state in the mature Lean Economy will have three primary responsibilities which are intrinsic to the integrity of its structure. The first is to sustain its own identity as a nation, and the identity of citizens as participants with a shared sense of commonality, a willingness to cooperate in the common public interest. Secondly, the state provides a setting for politics. It will sustain a confidence that people can safely and usefully participate in the making of policy and in holding government to account. And thirdly, the state must maintain a currency capable of responding quickly and effectively to its changing needs. Although the market can be expected to atrophy to a profound extent—profound enough to justify the term “post-market economy”—some trade will persist, and a currency will need to be sustained.



A nation has an identity which connects the people who live there to a particular place, and to each other. There is a landscape which many generations have shaped and defended, and there is an endowment of culture, language and institutions which, though they can be betrayed, cannot be denied. The nation is a located, bounded, particular homeland. If defeated, it often manages, eventually, to come back into being, with a sense of renewal and justice. It exists in the mind of its people.N32

Identity in this collective sense means that there is an identifiable meaning to the idea of “we”. Of course, “we” can mean almost anything, but in this context, the issue is one of commonality between people on a scale beyond the local. It is not a vague sense that I ought to recognise, or do recognise, a responsibility towards others; on the contrary, it is part of my understanding of myself that I belong to a particular population within particular boundaries. Far from being a conscious and circumstantial agreement with what a nation is doing, or a liking for its weather, or an appreciation of the business opportunities, it is a recognition of emotional attachment to a place and people, and of that attachment as a legitimate and essential asset.N33 The task for the Lean Economy is to rebuild social structure, emotional engagement and obligation after the devastation and social entropy of the market economy; to reconstruct a community of obligation. As the political philosopher David Miller writes,

Because our forebears have toiled and spilt their blood to build and defend the nation, we who are born into it inherit an obligation to continue their work, which we discharge partly towards our contemporaries and partly towards our descendants. [It is] a community which, because it stretches back and forward across the generations, is not one that the present generation can renounce.N34

Now, why should an identity in this sense matter? For two reasons. First, it has a direct consequence in terms of action. Nations are communities that do things together, take decisions, achieve results.N35 A state that has this constructive resource available to it has an asset of value: the asset of citizenship. But citizenship is not a generalised inclination to good behaviour; it is a convergence between the interests of the person and the well-being of the community. For that to work, the community must have an identity—if it does, there is no need for the paraphernalia of secret police and bureaucracy to enforce participation; the community-nation can depend on its citizens to participate as members, doing things which (unlike obeying the law and paying taxes) cannot be imposed and secured by regulation. It means being willing to take active steps in the interests of other citizens, and expressing commitment to the society by playing a part in its politics. Its people—notwithstanding a diversity of beliefs and styles of life—live together under laws and institutions which they can accept as legitimate.

The second reason why identity matters is that it provides the necessary basis for rational decision. There is an agreement that the national interest is something to be desired and promoted rather than avoided and prevented. There is a shared intention. The logic is in place. The nation joins up varied interests into a shared rationality.

Whether a population can sustain such a common identity or not depends partly on circumstances which are outside its control. It is much more likely to be feasible in the case of states which have well-defined boundaries, which have a common language, and which have a history of getting along together. With each breach in these conditions, identity and rationality alike become increasingly elusive, and public decision becomes disconnected from the rational interest of the state. Good intentions may abound, but there will be no consistent story, nor any assurance that decisions will be related to the state’s own interests. National identity is the precondition for national virtue. As Jean-Jacques Rousseau summarised, “Do we want people to be virtuous? If so, let us begin by making them love their homeland.”N36

That widely-extended virtue brings peace, a necessity if local lean economies are to have a future. But the sense of homeland on which it depends is in retreat; many nations—notably those of Western civilisation—are engaged in scrapping the conditions of culture and identity which sustain this concept of the nation. The presumption of wider peace as a setting for community building in the future is at risk. And yet peace, extending over the horizon from the community we live in, is at the heart of all our futures.



A state without that benign circle of shared identity, citizenship and a common rationality will, in the end, tend to collapse into constant local war and/or tyranny, whose way of coping with disagreement, as Bernard Crick writes, is to clobber, coerce or overawe all opposition (Big Stick). He adds,

The establishing of political order is not just any order at all; it marks the birth, or the recognition of freedom. For politics represents at least some tolerance of differing truths, some recognition that government is possible, indeed best conducted, amid the open canvassing of rival interests. Politics are the public actions of free men.N37

And Mr. Toad helpfully rounds off the logic: “Free! The word and thought alone were worth fifty blankets.”N38 The essential condition for freedom—for the successful functioning of a democratic state under the rule of law—is that those who are on the losing side in an argument about the design of that law should be willing to accept the result with good grace, acknowledging that the shared citizenship overrides the policy differences.N39 Here we have the central principle of the law being, as Larry Siedentop writes, “our own parent and child”: we make the law but, at the same time, the law makes us; it guides our intentions.N40 Since we do not all think in the same way, we may not agree about what the law should be, but we have a solution—politics, which relishes intelligent disagreement, giving debate itself an integral place in the nation’s understanding of how things are done within its territory.N41 Politics is enabled by territorial boundaries. There is no limit to the power governments need if there is no limit to their territories. Winners and losers in the political debate recognise both the claim of future generations who will want to inherit a political economy in working order, and that of past generations who might have hoped that their work would not be destroyed before it was understood.N42 This large-scale solidarity, as John Stuart Mill warned, is nothing less than a necessary condition for a free society. Miller summarises,

Unless the several groups that compose a society have the mutual sympathy and trust that stems from a common nationality, it will be virtually impossible to have free institutions. There will, for instance, be no common interest in stemming the excesses of government; politics becomes a zero-sum game in which each group can hope to gain by the exploitation of others.N43

Politics in this territorial setting is the enabling condition for a liberal culture. As John Laughland writes, with an urgency shared by many scholars in this field, “Without territorial jurisdiction there is no possibility of a liberal state.”N44



An economy with its own currency, which is “flexible” in the sense that it can move in response to supply and demand, and that it can be influenced by the government’s (or an independent national monetary policy committee’s) decisions on interest rates, enjoys a degree of protection.N45

One essential function of such flexible currency systems, wherein each nation is responsible for its own currency, is that they make it possible for a particular economy to get the economic management it needs—in the form of interest rates, taxation and government spending tailored to its particular circumstances, effectively steering it through upturns and downturns with the least possible damage. By contrast, in a multi-national single-currency area, economies can get very little effective management. Interest rates cannot be adapted in response to a single nation’s situation. Taxation and government spending can be altered, but these policies are relatively ineffective (or they can even make matters worse) without interest rate management to support them.N46

But, more fundamentally, national currencies allow exchange rates to move in ways that very approximately compensate for differences between the efficiency of economies, thereby allowing them to trade with each other comfortably without destroying one another—that is, without the stronger one driving the weaker one out of business, and the weaker one then dropping out of the market for the stronger one’s goods (and/or the workforce of the weaker one simply migrating to the stronger one, where there are jobs). As a means of adjustment between different economies with different relative strengths, changes in exchange rates are simpler, and unsurprisingly cause less damage to communities, than tidal flows of workforces and populations. In summary, currency flexibility provides a measure of protection which gives the less efficient nation a chance to catch up—to make its industry more efficient rather than having to close it down.N47

Consider, for instance, the case of an inefficient national economy that has trouble exporting its goods. If the value of its currency falls, this makes its goods cheaper to buyers in other nations. It also makes imports more expensive, so the home economy’s industries get a boost twice over.

Actually, a good case can be made for currencies to be organised on a substantially more local basis than even that of nations. As Jane Jacobs points out, a national economy is actually a set of city economies, each with different industries at different stages of development, with problems and opportunities affecting their ability to compete. If those changes in fortune are reflected in the value of a local/civic currency, the chances of a city being able to cope with bad times are much greater. Otherwise, one day it might find that the currency of the nation in which it is based substantially rises in value, making its own products much more costly and less competitive and—as happened, for instance, with much of the UK pottery industry in Stoke on Trent—putting it out of business.

Jacobs illustrates the problem of different cities and industries all having to work in the same currency in a famous and graphic image:

Imagine a group of people who are all properly equipped with diaphragms and lungs but who share only one single brain-stem breathing centre. In this goofy arrangement, the breathing centre would receive consolidated feedback on the carbon dioxide level of the whole group without discriminating among the individuals producing it. Everybody’s diaphragm would thus be triggered to contract at the same time. But suppose some of those people were sleeping, while others were playing tennis. Suppose some were reading about feedback controls, while others were chopping wood. Some would have to halt what they were doing and subside into a lower common denominator of activity. Worse yet, suppose some were swimming and diving, and for some reason, such as the breaking of the surf, had no control over the timing of their submersions. Imagine what would happen to them. In such an arrangement, feedback control would be working perfectly on its own terms but the results would be devastating because of a flaw designed right into the system.N48

Nonetheless, flexible city currencies of the kind that would give such city-by-city feedback don’t currently exist. There is ambiguity here: there is a theoretical possibility that cities could operate with their own local currencies (as the only currency available for purchases in the city), and this could become a reality in the future, but, for the present, they don’t, and we will take this as a fact of life for now. That is bad luck for cities like Detroit, whose prospects of a comeback in the teeth of competition from cities with state-of-the-art development programmes, training and skills—and capital to match—are poor.

But we do have national currencies, which supply at least some of the needed feedback and flexibility. It was not enough to save the UK’s pottery industry, but it is better than no feedback at all, which is what you get from (as Jacobs calls it) an “imperial currency” such as that of the Euro (€). Under that system, a relatively inefficient, high-cost economy such as Greece has to compete in the same currency and exchange rate as a cost-efficient economy such as Germany. Far from this acting as a boot camp challenge which forces the less efficient economy to make the necessary investment to raise its competitiveness, it essentially wipes it out as a serious competitor. A more competitive exception to this may be preserved in sectors where it has an absolute monopoly of supply, such as holidays in the Greek islands or visits to the Parthenon. But even there, the impoverished economy can be forced to sell these assets simply in order to keep going.N49

An early illustration of the level of interventionism needed to coordinate the breathing of complex systems was the tough action taken in Europe in the late 1990s to force the would-be Euro currencies down to the single, very low, rate of interest set by Germany. In 1990, Italy’s short-term rates were around 18 percent, with France at 10 percent, Spain at 15 percent, Germany at 6 percent—and the UK at 10 percent. By 1999, government action had got the rates in the Euro countries down to a common 3.25 percent (the Euro Interbank Offered Rate). Naturally, foreign direct investment boomed, as did stock markets and the price of houses and oil, but that made it hard for (for instance) pension funds that needed to get a decent return for their savers, so “structured products” designed to capitalise directly on that almost-free-money growth (betting on bets) flourished—with consequences that we know to our cost. Maybe high oil prices did have something to do with it, or maybe—as in the case of the reckless housebuilding in Ireland—they were simply another effect of cheap money. At most, they were only the final symptom of an assault on nations’ duty of care in the matter of maintaining sensible interest rates for their national currencies.N50

This matter of currencies is crucial, not only to the future of nations, but, on the minute scale, to local lean economies. Only with an understanding of the way in which flexible local/citywide/national currencies can keep their respective economies in business, can sense be made of the argument for or against national currencies, and of the case for local currencies.N51

In the mature Lean Economy, nations will sustain their national currencies. There will be local currencies operating as well as the national currency, but guardianship of the national currency at the national level will be a non-negotiable duty of government. Loss of control of national currency ripples through into loss of capability in economics, the progressive irrelevance of policy and the fading of national identity to a remnant of tourist stereotypes.


The nation, then—one of the damaged, but surviving, political assets of the late market economy—is a necessary framework for building the stability needed by the Lean Economy. Scrapping it would be unwise, for the space vacated by the loss of national competence could be filled, all too quickly, by other, more regrettable, forces.


Empire: a state with a mission

Rather than deriving an identity from long association with a particular place, as in the case of nations, empire exists to fulfil a mission: to impose a single social and cultural regime from the top down. There is “unity in design, and perseverance, and boldness in pursuit”, as Burke wrote of revolutionary France.N52 The Lean Economy, in sharp contrast with this, will need to invent and build diverse responses from the bottom up, while at the same time looking to the top to keep the peace. And here lies a test for the nation: the disorder that follows the climacteric will present the state with this indispensable task to do—as indispensable as maintaining the irrigation systems in the despotic regimes decried in Unlean. If nations, and their accountability, are too weakened and devalued to fulfil that role, the sequel could be empire.

In empire, the sustained politics (disagreement contained with a common identity) which is one of the defining and enduring characteristics of nations does not exist; the state is either defined by its imperial mission or not defined at all. The empire stands for a particular programme, which has to prevail. And persuasion is never quite enough: it has to be backed up. New empires, as a general rule—intoxicated by their newly-acquired strength—tend to be aggressive. The security task has to succeed, whatever it takes. The consequences of this are illustrated by Hans Buchheim’s explanation of the situation facing the security chief of an imperial regime:

He can never fall back on the excuse that he has done everything possible for security within the framework of law and ethics; he may not rest until he has taken into account the final conceivable possibility of protection. Even if he himself were completely free of ambition and power drive, he would have to go all out to gain the last key position and to eliminate the final suspicious character. And since he is bound to no standards, he will in the end not limit himself to safeguarding the existing order but will try to bring about an order that offers the utmost possible security: the police state.N53

Underlying that compulsion, there is always some proposition which, at first hearing, is quite plausible and reasonable. No one can reasonably disagree with the claim that there is a need for international coordination to contain terrorism and to address international problems such as climate change; it does not, however, follow that the formation of a large new empire is the right way to set about it.

As the System Scale Rule tells us, large-scale problems do not require large-scale solutions; they require small-scale solutions within a large-scale framework. What a major collective task needs is nations with identities and a culture, and a political system organised on the principles of pull that are characteristic of lean thinking. And it especially needs to avoid the reduction of logic and argument to idiot simplifications, or the seduction of nations by one charismatic person, no matter how enlightened or sincere.N54 As Edward Gibbon warns in his story of the landslide from the brilliance of Marcus Aurelius to the homicidal psychosis of his successor (his son, Commodus), the victims “must often have recollected the instability of a happiness which depended on the character in a single man”.N55

By contrast, the Lean Economy and its political context cannot be understood at first glance. It is a landscape of judgment, stories, tradition and politics, common capability and common purpose. It will be feasible if, and only if, it is in the stable setting of a nation.


The tragedy of the regions

Regions in Europe are now pressing their case for increased autonomy. However, as they develop political and administrative structures and confidence, they will, in a sequence analysed by Larry Siedentop, drain power from nations, only to pour it back into the imperial framework which sees it as its mission to abolish nations. The “tragedy of the regions” is the tendency of regions, while seeking greater independence from the nation state, to fall into the more authoritarian embrace of empire.N56 They may think that they can protect their independence and make their interests heard within the wider setting of the empire, but the error is naïve. Siedentop, writing of Europe, notes that:

The lure of Brussels for resurgent regionalisms is that it provides a centre which can be played off against the traditional “oppressors”—i.e., existing nation-states. . . . The danger is that in throwing off the “shackles” of the nation-state—rejecting national subordinations which are perceived to be oppressive—there will also be thrown away civic cultures which incorporate democratic norms.N57

And there is a reduced chance—in a centralised setting such as that being developed by the European Union—of rebuilding a stabilised society from the bottom-up. Its organisational model is a bureaucracy with the right to make its own laws. Indeed, smaller-scale political organisation, including counties and their European equivalents, is already in trouble. The French counties were abolished by the French Revolution and replaced with large Départements named after rivers. As one analyst writes,

The size of the regions makes every intermediate body between them and the communes [local authorities] totally redundant. At best the provinces can be used as a geographical and administrative frame for implementing national and regional policies; but as an independent policy body, their role is over.N58

And the loss of counties, in turn, means the loss, or weakening, of the level of government and administration with the knowledge, accessibility and patience for local detail. The claim of subsidiarity is made by European leaders when they have to deal with popular fears about the centralising power and weakened democratic accountability of the Union. In fact, it is the right of regions to do as they are told.

Counties represent the scale on which the local can develop collective expression. They are small enough to be directly in touch with, and aware of, particular local practice; being numerous (England has 50 counties, compared with 12 regions), they do not naturally form power cliques with central government; their authority comes up from below, not down from above.

During the five years of the Second World War, regional government showed what it could do. It acted quickly; it distributed; it used local knowledge; it mobilised local resources and goodwill; it improvised. It planned a massive, necessarily authoritarian programme. Without it, according to the historian A.J.P. Taylor, “war socialism would not have been possible”. But on this occasion, he was too easily impressed: when the system was dismantled after the war, he wrote, “the chance was lost to give England the blessings of regional government”.N59 Certainly, if the state really wishes to prepare for a life of the top-down control needed in wartime, the establishment of a regional structure is a good first step.N60

The power of one tier of government is in inverse relation to that of the tiers immediately above and below it. The case can, no doubt, be made for the sequence:

small group → NEIGHBOURHOOD → parish → CITY → county → REGION → nation → EMPIRE → planet

In the urban market economy, with its good connections, it is not out of the question for people to drive long distances to the regional centre to discuss matters of strictly local concern; and the regional city itself is the centre of economic and political gravity. But in an energy-limited, transport-constrained context, where the principle of cohesion in a shared culture will matter again, the decisive advantage of being able to support local detail lies with the county, in turn supported by the nation:

SMALL GROUP → neighbourhood → PARISH → city → COUNTY → region → NATION→ empire → PLANET

The planet needs devolution down to local decision-making; that in turn needs detailed support at the county level, and the effective protection that nations can offer. The local needs the nation.


Related entries:

Groups and Group Sizes, Reciprocity and Cooperation > Latency.

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David Fleming
Dr David Fleming (2 January 1940 – 29 November 2010) was an economist, historian and writer, based in London. He was among the first to reveal the possibility of peak oil's approach and invented the influential TEQs scheme, designed to address this and climate change. He was also a significant figure in the development of the UK Green Party, the Transition Towns movement and the New Economics Foundation, as well as a Chairman of the Soil Association. His wide-ranging independent analysis culminated in two critically acclaimed books, Lean Logic and Surviving the Future. A film about his perspective and legacy - The Sequel: What Will Follow Our Troubled Civilisation? - was released in 2019, directed by BAFTA-winning director Peter Armstrong. For more information, including on Lean Logic, click the little globe below!

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