the orthodox view, centraHzation is generally a “good” and progressivernmovement, whereas disintegration and secession, evenrnif sometimes unavoidable, represent an anachronism. It is assumedrnthat larger political units—and ultimately a single worldrngovernment—imply wider markets and hence increasedrnwealth. As evidence of this, it is pointed out that economicrnprosperity has increased dramatically with increased centralization.rnHowever, rather than reflecting anv truth, this orthodoxrnview is more illustrative of the fact that history is typicallyrnwritten by its victors. Correlation or temporal coincidence dornnot prove causation. In fact, the relationship between economicrnprosperity and centralization is very different from—indeed,rnalmost the opposite of—what orthodoxy alleges.rn/ O ecesslon increasesrnI ethnicjinguistic,rnv _ ^ religious,andrncultural diversity, while in the coursernof centuries of centralizationrnhundreds of distinct cultures werernstamped out.rnPolitical integration (centralization) and economic (market)rnintegration are two completely different phenomena. Politicalrnintegration involves the territorial expansion of a government’srnpower of taxation and property regulation (expropriation).rnEconomic integration is the extension of the interpersonalrnand interregional division of labor and market participation.rnIn principle, in taxing and regulating (expropriating) privaternproperty owners and market income earners, all governmentsrnare counterproductive. They reduce market participation andrnthe formation of economic wealth. Once the existence of arngovernment has been assumed, however, no direct relationshiprnbetween territorial size and economic integration exists.rnSwitzerland and Albania are both small countries, but Switzerlandrnexhibits a high degree of economic integration, whereasrnAlbania does not. Both the United States and the former SovietrnUnion are large. Yet while there is much division of laborrnand market participation in the United States, in the SovietrnUnion, where there was virtually no private capital ownership,rnthere was hardly any economic integration. Centralization,rnthen, can go hand in hand with either economic progress or retrogression.rnProgress results whenever a less taxing and regulatingrngovernment expands its territory at the expense of a morernexpropriative one. If the reverse occurs, centralization impliesrneconomic disintegration and retrogression.rnYet a highly important indirect relationship exists betweenrnsize and economic integration. A central government rulingrnover large-scale territories—much less a single world governmentrn—cannot come into existence ab ovo. Instead, all institutionsrnwith the power to tax and regulate the owners of privaternproperty must start out small. Smallness contributes to moderation,rnhowever. A small government has many close competitors,rnand if it taxes and regulates its own subjects visiblyrnmore than these competitors do, it is bound to suffer from emigrationrnand a corresponding loss of future revenue. Considerrna single household, or a village, as an independent territory, forrninstance. Could a father do to his son, or a mayor to his village,rnwhat the government of the Soviet Union did to its subjectsrn(i.e., deny them any right to private capital ownership) or whatrngovernments all across Western Europe and the United Statesrndo to their citizens (i.e., expropriate up to 50 percent of theirrnproductive output)? Obviously not. Either there would be anrnimmediate revolt and the government would be overthrown orrnemigration to another nearby household or village would ensue.rnContrary to orthodoxy, then, it is precisely because Europernpossessed a highly decentralized power structure composed ofrncountless independent political units that explains the origin ofrncapitalism—the expansion of market participation and of economicrngrowth—in the Western world. It is not by accident thatrncapitalism first flourished under conditions of extreme politicalrndecentralization: in the northern Italian city states, inrnsouthern Germany, and in the secessionist Low Countries.rnThe competition among small governments for taxable subjectsrnbrings them into conflict with each other. As a result ofrninterstate conflicts, historically drawn out over the course ofrncenturies, a few states succeed in expanding their territories,rnwhile others are eliminated or incorporated. Which states winrnin this process of eliminative competition and which ones loserndepends on many factors, of course. But in the long run, therndecisive factor is the relative amount of economic resources atrna government’s disposal. In taxing and regulating, governmentsrndo not positively contribute to the creation of economic wealth.rnInstead, they parasitically draw on existing wealth. However,rnthey can influence the amount of the existing wealth negatively.rnOther things being equal, the lower the tax and regulationrnburden imposed by a government on its domestic economy,rnthe larger its population tends to grow (for internal reasons asrnwell as immigration factors), and the larger the amount of domesticallyrnproduced wealth on which it can draw in its conflictsrnwith neighboring competitors. For this reason centralization isrnfrequently progressive. States that tax and regulate their domesticrneconomies little—liberal states—tend to defeat, and expandrntheir territories at the expense of, nonliberal ones. Thisrnaccounts for the outbreak of the “industrial revolution” inrncentralized England and France. It explains why in the coursernof the 19th century Western Europe came to dominate the restrnof the worid (rather than the other way around), and why thisrncolonialism was generally progressive. Furthermore, it explainsrnthe rise of the United States to the rank of superpower in therncourse of the 20th century.rnHowever, the further the process of more liberal governmentsrndefeating less liberal ones proceeds—i.e., the larger thernterritories, the fewer and more distant the remaining competitors,rnand thus the more costly international migration—thernlower a government’s incentive to continue in its domestic liberalismrnwill be. As one approaches the limit of a One Worldrnstate, all possibilities of voting with one’s feet against a governmentrndisappear. Wherever one goes, the same tax and regulationrnstructure applies. Thus relieved of the problem of emigration,rna fundamental rein on the expansion of governmentalrnpower is gone. This explains the course of the 20th century:rnwith World War I, and even more with World War II, the Unit-rn24/CHRONICLESrnrnrn