Kashmir not Kosovo

Whichever way the unilateral declaration of independence by (predominantly Muslim) Kosovo from (orthodox Christian) Serbia turns out, the episode poses an interesting question to the rest of the world: what has changed in the last half-century that small states have suddenly become viable when, for the previous 300 years, the tendency was towards ever larger states? To put it differently, is the 21st century going to see an accelerating trend towards the creation of smaller states, as people with sub-national identities no longer feel impelled by economic factors to belong to a larger whole? And what sort of model are we going to witness: federations or entirely new nation states? If sub-nationals regard either the US or the Indian models as satisfactory, we could get a federated system "" which in some senses is what the European Union too is becoming. On the other hand, if they regard complete nationhood as more desirable, then we could get more nation states.

One of the most important motive forces towards the latter is the virtual disappearance of military expansionism among the large powers and also of the resultant territorial aggrandisement. Another is misrule or extreme violence by the state against a sub-national population, forcing the people to revolt and provoking external intervention by the United Nations or someone else. Small countries born in such circumstances (East Timor, for instance) have an external security umbrella, which makes them immune to attack. Kosovo, as it happens, is protected by Nato forces and policed by European Union policemen, without whose presence Serbia might well squash the newly state's independence pretensions. Likewise, East Timor was born with UN intervention. This means that sub-national identities can organise themselves as nation states if they have strong external backing.

After the industrial revolution, the tendency towards militaristic expansion was driven largely by the need to achieve scale economies. Larger captive markets were essential for this purpose. This lay behind the creation of large empires. The emergence of newly industrialised countries and the intensified competition for markets and raw materials are what led, among other things, to the First World War. Post-war reconstruction required domestic capital to be trapped within national borders and the need to protect domestic industry led to high tariff walls. This global construct endured till the Tokyo round of international trade talks resulted in the gradual dismantling of high tariff barriers. This made smaller countries viable in the Hecksher-Ohlin sense of comparative advantage, but in the absence of free global capital flows and limited domestic savings, adequate investment was still a problem. Since the 1980s, however, global financial integration has meant that the domestic savings gap is no longer a binding constraint. Taken together, low tariff barriers, international capital flows and enhanced military security of one kind or another have created conditions conducive to making smaller nation states viable constructs.

That having been said, it remains to be seen whether Kosovo can remain a viable state. It has 60 per cent unemployment, rampant corruption and an average wage of barely Rs 10,000 per month. East Timor may be more viable because of its oil. Meanwhile, Abkhazia and South Ossetia in Georgia have made known their intention to declare independence. It goes without saying that they will succeed only if there is western intervention.

For India (and many other countries faced with internal insurgencies, like Spain and Greece), the inevitable question is what the trend means. Certainly, in India's case, the Kashmir situation is far removed from the history of Kosovo over the past decade; the strength of the Indian democratic system and of the Indian state (combined perhaps with the weaknesses of Pakistan) has helped it contain the problem, while dictatorial and brutal Serbia has failed.