Electronic technology and the information explosion have created a situation that might be described as the twilight of sovereignty. This does not mean that the nation state will disappear, indeed we will see more countries formed, but the power of government is attenuating.

What is already happening is unique in the history of the world. The concept of human freedom is a virus, a virus that is spreading across the global telecommunications network, and all governments are learning that there is no antidote for freedom. Barbara Ward observed that revolutions don't occur until people learn that there is an alternative to their way of life. The news about these alternatives now bounces off satellites, and moves across movie screens all over the world. Indira Ghandi once said that when a peasant in India sees a movie in which a housewife opens the door of her refrigerator and there is food in the refrigerator, that is a revolutionary statement. Today, everybody in the world can watch on television the destruction of the Berlin Wall or see the Soviet Union in turmoil. The result is that the concept of freedom is spreading, and the dictatorships of the world are all crumbling. For the first time in history, the ordinary person in the farthest reaches of the world knows there is an alternative way to live. This is the most important thing that has happened in our century. And it is going to keep right on happening. The path to freedom for the people of the world is not going to be smooth, and there will be setbacks, like Tiananmen Square, but at the end of the day the movement is absolutely irreversible.

The second great tide running in the world is that almost nobody believes in the socialistic experiment anymore. It doesn't feed the people. So in one form or another the market economy is being tried almost everywhere in the world. People are learning that a free market economy and a free populace go hand in hand. This news is also traveling on the global network of telecommunications, and creating a global market for ideas and capital that is so powerful that while individual governments may interrupt it for short periods of time, in the end they cannot stop it.

In the international financial arena, the world now operates on what I call the information standard, which is more draconian than the gold standard. If the President of the United States goes out in the Rose Garden and makes an announcement, there are about 250,000 screens in trading rooms in the world that will light up with the news. And traders buy or sell the dollar depending on their evaluation of whether the new policy is good or bad for the value of the dollar. The actions of all governments are now subject to the same global inspection, and are immediately rewarded or penalized. Today everything that happens in the world feeds into the global telecommunications network, and governments are powerless in the short run to influence the exchange rate of their currency. The good news is that the only way they can affect the value of their currency positively is to pursue sound economic policies. So I would argue that the market over time will force governments that have bad policies to reverse them. An example of this was Mitterand, who came in as President of France as a socialist, and nationalized everything. France immediately lost about a third of its foreign exchange reserves. The information standard so penalized France that Mitterand reversed his policies. That is a tremendous discipline on a government that is happening everyday.

Governments do not willingly accept the idea of the information standard because they like to preserve the illusion that they can manipulate the exchange rate,but today central bank intervention just turns into an expensive failure. This is true because the market transactions in one day exceed the reserves of all the central banks of the world. Unlike the gold standard or Bretton Woods, nations cannot resign from the information standard. There is no place to hide. No matter what governments do, the screens in the trading rooms will continue to light up, and the market will reward sound policies and punish the bad.

Today this global electronic market allocates money capital across borders as if they did not exist. Capital moves toward the best blend of return and safety. It cannot be driven by government; it can only be attracted. Although money capital will always be important in building the world's economy, intellectual capital is now arguably becoming the most important form of capital. People who can write complex software programs or design the wing of a new airplane can walk across national borders and tell customs officers, "I have nothing to declare."Their minds alone hold true wealth-creating capital. Our laws are designed to prevent the movement across borders of physical goods, but as borders become porous to the movement of ideas and money, they become less important. The telecommunications network is doing what politicians couldn't-making a global market.