When you enter a bar in downtown New York, you need to have your ID ready. When you cross the border from Bolivia to Argentina, you need to present your passport. And when you drive your car through Germany, you might be asked to show your driver’s license to the police. All these official documents are issued by national authorities that require birth, naturalization or at least residence within the borders of the issuing nation state. Think of the nation state as a quite exclusive club, which, by issuing these documents, proves your membership. Depending on how lucky you are, your club is well respected, deliberately ignored or virtually outlawed. It doesn’t matter how intelligent you are, how cruel, how hard-working or how good-looking: It’s the nation state you are born into that vouches for you (naturalization is generally a hassle). And it’s the nation state’s reputation you are depending on.
As long as we have been spending most of our private lives and our careers within the borders of the nation state, that didn’t really matter. Most of our friends, our family, our business partners, our employers or employees had the same nationality, and, therefore, we were on a level playing field. But today, as all these aspects of action and interaction have become far more global, we begin to realize, that nationality may be an asset – or a drawback. Our competitors may deliver worse quality products, but they are more trustworthy, because they can operate with the support of a specific nation state.
A global nation state?
The internet has the potential to level the playing field again. It may not only provide the world with access to the global marketplace, but also it may set the cornerstone for a new concept of identity. If, for the time being, we ignore the romantic part of identity, it is only a means that trustworthily confirms that you are who you pretend to be. You are assigned some names (name, surname, place of birth), and some numbers (passport number, date of birth) that allows other people to uniquely identify you. By doing that, it establishes confidence between you and your counterpart.
Now, looking at the service of giving you an identity it seems puzzling that we rely so greatly on the nation state as a provider of this service. Why shouldn’t we trust other institutions or private organizations to provide us with identities? We actually do. Our profiles at Uber, Facebook, LinkedIn, AirBnB etc., are such identities. And they are trusted. But only to a certain extent. You might be ready to wire a couple of hundred dollars for a room to a guy you met on AirBnB – but would you wire him a couple of hundred thousand dollars to buy a house to a guy you have only seen a picture of and read some cool recommendations about? Probably not. You probably want to have a reliable guarantor for the guy.
Basically, this seems to be a pretty interesting business idea: You verify identities and issue certificates, but instead of being a nation state and limit your clientele to the people who live within a specific area, your identity service might be offered globally, to everyone. And bam – here’s the end of the nation state!
But there’s a rub in that idea. As a matter of fact, not all your customers will behave as they have promised. Maybe the house the guy just sold in fact didn’t exist. So the buyer will ask you – as the guarantor – for compensation. This means you must be able to sanction misbehaviour from your customers. And up to now, it is only nation states who have police forces, courts and jails. Because only they can guarantee the complex system of rule of law and democratic processes that are required to provide people with full-fledged identities.
Two classes of citizens
But although it is still only nation states that can do this – the concept is still about to change. Estonia, for example, has begun to issue e-citizenships. These identification cards do not give you full Estonian citizenship (meaning you don’t have to pay taxes and you’re not allowed to vote or live in Estonia). But they allow you to open a business or a bank account in Estonia and thus, to do business as an Estonian – no matter where you live.
Certainly, this new concept of citizenship provides individuals around the world with new and wonderful opportunities. But it also raises new questions: How does Estonia deal with the fact that it has two classes of citizens that have different rights and duties? How do other members of the European Union react to the fact that Estonia allows non-Europeans to benefit from the common market without contributing to it? And can Estonia really sanction misbehaviour of its digital citizens around the world?
No matter how the Estonian experiment will end, the demand for identity in the digital economy will challenge the nation state’s ability to cope with the needs of its citizens a.k.a. its customers. And it is obvious that many of the nation state’s services on display are quite antiquated. The nation state’s innovation power is required for him to stay market leader in the identity business.
Read more in this column Maximilian Stern: Who runs the Internet?