The concept of centralization is generally seen as a consequence of certain political decisions or as the cause of certain societal structures. But centralization and its opposite—decentralization—can also be interpreted as opposing historical processes that should be taken into account in the long struggle for liberty.
Forces of Centralization
Centralization is a historical process that is “centripetal” in nature; it is the totality of forces in society that move economic wealth and political power towards one or a few centers. This process should be thought of, not only in the geographical, but also organizational sense. Indeed, as means of communication improve, centralization may even conceivably be mainly institutional.
There is a natural tendency for human society to centralize. People are more efficient and more protected in large communities, rather than spread out as isolated individuals or small groups. The obvious interests in sharing information and trading goods give a natural incentive for people to gather on the proverbial “marketplace.” Groups of people allow the division of labor that is fundamental for social and economic development. These incentives in turn drive the improvement of communications and the harmonization of standards and laws. As Ludwig von Mises wrote in Nation, State and Economy (1919):
The necessity of trade is pressing for unity. It will no longer do to permit the fragmentation in law, in monetary systems, in communications and transportation, and in many other fields, to continue. In all these fields the times require unification, even beyond national boundaries.
Urban centers slowly grew as a result, leading to a centralization of both economic and political power. The coalescence of societies over the long-term is a testimony to this process, ongoing long before the emergence of the modern state. Europe went from hundreds of states in the Middle Ages, to tens of states today, as more and more territory was gobbled up by the stronger states through wars and annexations. China centralized (and united) politically much earlier, reaping economic benefits from uniformity in laws and norms. Mises again: “[Liberty] strives for the greatest possible unification of law.”
This development of national states actively pursuing legal and economic control over larger and larger territories added a rather less organic component to centralization. An example of this is the spectacular territorial growth of the United States during the 19th century, as power flowed over time to the federal government at the expense of the states. Another example is the transformation of the European Union from a free trade block, guaranteeing freedoms of circulation in Europe in 1958, to a political would-be superstate with further ambitions of power.
There is thus a natural tendency towards centralization in human society, which is necessary for free market capitalism. But there is also a more artificial and nefarious centralization, driven by the state’s accumulation of power. This process continues today in the form of political globalization. The theoretical endpoint of this political centralization is a single world government. It is the “End of History” in the Hegelian worldview; i.e., the culmination of the world-historical process into the homogenous universal state. It is the antithesis of liberty.
Forces of Decentralization
Running counter to centralization is the historical process of decentralization. This process is “centrifugal” in nature; it tends to disperse economic wealth and political power outwards from one or a few centers. The centralizing and decentralizing forces coexist with different intensity at different times, tugging on society in opposite directions, waxing and waning as conditions change.
Decentralization is driven by the reality that society benefits greatly from individual independent decision-making. As Mises wrote in Human Action (1949); “the ‘anarchic’ state of production results in supplying people better than the orders of a centralized omnipotent government.” The point of Mises—and Hayek after him—was that the availability of decentralized and unhampered price-setting on the market are crucial since they are signals that communicate information to buyers and sellers. This is what Mises called the “democracy of the market.”
Between nations, decentralization is driven by the fact that free trade optimizes the wealth of nations, as Adam Smith showed. Trade that is unhampered by tariffs and other trade barriers imposed from political centers can therefore not easily be resisted over time, as the benefits of economic freedom progressively become evident. The progressive reduction of tariffs over time—albeit with occasional blips—is evidence of this.
Mankind initially lived completely atomized. Decentralization thus remained latent for most of history, as the centralizing forces slowly consolidated and harmonized communities around the world. But, as seen above, if taken too far, centralization hinders rather than supports the creation of wealth and the accumulation of capital in society. Thus, as the consolidation of power continues centralization tends to be resisted by the ruled majority, as it becomes geographically or hierarchically distanced. In other words, when centralization becomes counterproductive to the political development or the economic growth of society, like a compressed spring, the decentralizing forces build and start to oppose this process.
In Europe, the forces of economic and political decentralization strengthened, for instance, with the decline and fall of the Roman Empire and during the Enlightenment (1685-1815) when too much centralization had led economically to mercantilism and politically to absolutism. In China, excessive centralization in the final years of the Tang Dynasty (618–907 CE) yielded to decentralization, as rampant political corruption, deepening inequalities and escalating peasant unrest, fractured the Middle Kingdom, as land concentration, oppressive taxation, and court intrigues eroded stability and plunged the people into hardship.
The Struggle for Freedom
The struggle for freedom should be seen in the context of the framework constructed above; this complex ebb and flow of the historical forces of centralization and decentralization. Economic and political freedom today clearly depends on decentralization prevailing over centralization.
In the last decades, the world has been going through a period of political centralization with the hailed “unipolar moment” and the destructive ideology of political globalization. The Western financial and political elite has quite successfully managed to impose its global plans through its control of the international banking system and supranational institutions. Centralization in the West is now pushing societies into decline as state interventionism, top-down decision-making and suffocating taxation show no sign of abating despite clear signs of popular opposition. The increased resistance to the centralization zeal from the West upon the rest of the world also partly explains the current conflictual international situation.
However, it is important to see that the outcomes of the opposition between the forces of centralization and decentralization are not inevitable or preordained; they can be influenced, exacerbated, or attenuated by ideas and actions. This is why Mises often insisted on the impact of ideas on the direction of society and stressed the importance of getting involved “into the great historical struggle, the decisive battle into which our epoch has plunged us.” It is thus as important as ever to spread and explain the ideas of economic and political freedom, in order to decisively tilt society towards decentralization and freedom.
