Decentralization Is Winning the War Against Centralization

Think back to your American history class, and you might remember being taught the differences between federalism and anti-federalism.

On one side were the Federalist Founding Fathers, led by statesmen such as Alexander Hamilton and John Adams, who believed in a strong central government. On the other side were the anti-Federalists, led by Patrick Henry of “Give me liberty or give me death” fame, who believed in a weak central government.

Today, nearly 250 years later, we might think of this ideological rift in terms of centralization (a strong central authority) versus decentralization (a more distributed system). In fact, I would go as far as to say that the push-and-pull of these two forces is the great contest of our times. And I believe decentralization is winning out.

The global trend toward decentralization really got a boost six years ago when the United Kingdom voted to leave the European Union. Brexit was about redistributing power from a bloated centralized authority, Brussels, and returning it to London. Admittedly, the U.K. has faced a number of expected challenges since it officially departed the EU in January 2020, including a slump in trade and foreign direct investment (FDI), but I believe these issues will be ironed out over time and the country will be stronger for it.

Two Case Studies in Centralization: Russia and China

The truth is that the world is a safer, richer, more transparent place when power is distributed across a greater number of actors, not fewer.

Consider what’s happening in Eastern Europe. Russia’s efforts to take over Ukraine are a highly centralized move, one that will ultimately fail. In the meantime, Moscow is paying the price because of stiff international sanctions.

And then there’s China. Tens of millions of people in Shanghai, Beijing and other cities have become prisoners in their own homes due to the country’s sweeping zero-Covid policy. As of this week, one out of every five container ships across the world is waiting to dock at a Chinese port, with the worst yet to come in terms of global supply chain disruptions, all because of the centralized Chinese Communist Party’s hardline approach to containing the virus.

The economic and financial impact has been significant. Shanghai-listed stocks have sold off to two-year lows, and the country’s manufacturing industry, as measured by the purchasing manager’s index (PMI), contracted in March.

What’s more, the Chinese yuan just had one of its worst months on record against the U.S. dollar, plunging as much as 4.5% at its low.

It’s largely due to the actions of these two highly centralized countries that the world is experiencing the highest rates of inflation in decades. In March, global food prices hit a new all-time high going back to 1961, which I’m sure everyone reading this is feeling.

Progress Is Made Possible Through Decentralization

Meanwhile, here in the U.S., decentralization still holds, even if it doesn’t feel like it sometimes. That’s thanks to Founders like Patrick Henry, who fought to include a Bill of Rights that, as the name implies, conferred certain liberties to individuals and states that the federal government could not take away.

Americans also enjoy separation of powers, as well as checks and balances, so that no single government branch can make all the decisions. A good example of this type of decentralization in action is when a federal district court judge recently struck down the White House’s mask mandate on mass transit, including commercial flights.

I was in sunny yet cool San Diego this week attending and speaking at the 24th annual Investment U Conference, sponsored by the Oxford Club, and the flight here was the first I took during the pandemic that did not require passengers to wear a mask. As someone who had to wear a mask during the entire 14-hour flight to Dubai last October, I’m relieved the U.S. is finally putting the worst days of Covid behind it.

But I’m not just speaking for myself. While Chinese families aren’t permitted to step out and grab food for the week, Americans are free to travel and congregate and conduct business in person. In addition, I believe that not having to wear a face covering will encourage more people to take longer-distance flights, and that’s made possible through decentralization.