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Controversial Israeli military historian Martin van Creveld argued (in his brilliant The Rise and Decline of the State) that government – the most important institution in the world – peaked in the 20th century and was now, as another seer once memorably put it, withering away. Writing in 1999, Prof. van Creveld seemed perceptive but not necessarily persuasive. Now the evidence of shrinkage is overwhelming: The limitations of the state are obvious. Were he so inclined, Prof. van Creveld could write an epilogue: I told you so.

Among the affluent democracies, countries now struggle to avert bankruptcy. Throughout the Middle East, civilian populations summarily fire dictators. In the U.S., the Federal Reserve creates trillions of dollars from thin air – money to boost equity markets, to create an illusion of wealth. Everywhere, government bureaucracies expand and government debt rises. Governments get bigger, even as they grow weaker.

The state peaked militarily, Prof. van Creveld said, on Aug. 6, 1945 – the "fine summer day" when an atomic bomb fell on Hiroshima. The state had gone too far. Any greater deployment of military power would have required the annihilation of nations. People's trust in government eroded. The armies of the superpowers proved ineffective in small-scale wars. (Prof. van Creveld once expressed doubt that the Israelis could ever win against the Palestinians: "When you are strong and you are fighting the weak, everything you do is criminal.")

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With its ability to wage victorious war diminished, governments turned inward after the Second World War, adopted socialist economic models and built cradle-to-grave welfare states. They began by nationalizing industry, then vastly expanding bureaucracies to care for the old, the poor and the sick. Once established, these bureaucracies grew relentlessly. Canadian governments now employ more than three million people. U.S. governments now employ more than 21 million (not counting military personnel).

The welfare state, Prof. van Creveld said, peaked in 1977, when governments realized the only way to expand programs was to pay for the expansion with borrowed money. He also dated Canada's welfare-state peak in 1977, when, for the first time, the federal government cut back on social welfare programs – in the first instance, limiting outrageously generous UI benefits. The state had hit the wall.

Prof. van Creveld anticipated calamitous consequences. "The shrinking of the state," he said, "will affect every living person, producing upheavals as profound, and probably as bloody, as the upheavals that propelled humanity out of the Middle Ages."

The state responded by swapping sovereignty for economic growth. It dumped the industries it had recently nationalized. It adopted free-market economics to generate faster growth – and to capture more tax revenue. It began to break its promises.

Prof. van Creveld thought the welfare state was effectively destroyed by its own success. Between 1940 and 1975, government's share of GDP "doubled in Germany, tripled in the U.K., quadrupled in the Netherlands and quintupled in Denmark." Yet, the apparent need for state intervention increased, proving "the amazing ability of the welfare state to aggravate the social problems it was designed to cure." The paradox was this: The larger the benefits, the larger the number of people who qualified for them; the larger the number of people who qualified for benefits, the larger the bureaucracy.

Prof. van Creveld blamed the state's decline on the nature of bureaucracy. "Considered as individuals, bureaucrats may be mild, harmless and self-effacing people. Collectively, they have created a monster whose powers far exceed the mightiest empires of old. By merely waiting, a bureaucrat can outlast any individual. For the first time in history, victory goes to the buttocks rather than the fist."

The Soviet Union, Prof. van Creveld said, was the first state to exhaust itself completely in war and welfare – but then it was an experiment to determine the feasibility of a totalitarian state. But the democratic state, he said, has also lost its raison d'être and has, of necessity, delegated much authority to multinational companies, NGOs, criminal gangs, all sorts of organizations – and to mere things, too, such as the Internet – that are neither territorial nor sovereign. The state is in full retreat. As Prof. van Creveld warned, the retreat could well turn into a rout.

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