On balance, the Internet may play a greater role in consolidating political power than in eroding it.

Around the world, governments are shrinking. In the United States, the vogue term for the phenomenon is devolution, the systematic "return" of authority and decision-making from the federal Leviathan in Washington to state and local governments. On other continents, bloody conflicts ostensibly waged to liberate ethnic and religious enclaves are tearing nations apart -- Chechnya and Kosovo being prominent examples.

Many observers argue that advances in information technology and the growth of the Internet are accelerating this fragmentation of political power. Smaller governments have increased capacity to manage more complex policies thanks to the reduced expense of computer technology. Thus, many American states are in better positions to administer welfare programs today than they were, say, 25 years ago. The Net also weakens many citizens' sense of national identity by uniting people with common backgrounds or interests who are divided by accidents of political geography. For example, French Bretons are reconnecting with their Celtic cousins in Wales. And anti-WTO protesters from all over the world were able to meet and coordinate their Seattle protests largely using Web sites and e-mail lists.

On balance, however, the Internet may play a greater role in consolidating political power than in eroding it. This is because the Net increasingly is rendering local, state and even national governments incapable of regulating behavior that spans jurisdictions. For the moment, the effects are best seen in the States where Web use is most widespread. Consider two basic government activities: crime-fighting and taxation.

The Internet has proven extremely hospitable to a broad range of criminals, from hackers and scam artists to data thieves and pedophiles. What attracts all these miscreants to the Web are the characteristics that render local and state law-enforcement authorities helpless. Online transactions are conducted across borders, frequently anonymously, making them difficult to trace. Thus, the applicability of laws is ambiguous and enforcement is difficult.

As a result, the federal government has assumed an ever-larger role in tracking and prosecuting criminals who were previously handled by state and local authorities. For example, the FBI's Innocent Images program targets online pedophiles with agents who, in the guise of 13-year-old boys and girls, lurk in chat rooms waiting to be propositioned. The Federal Trade Commission, the Securities and Exchange Commission and other government agencies are also dramatically increasing their capacity to pursue scammers and con artists who use the Web to elude state and local authorities. Even the Food and Drug Administration has proposed spending $10 million to stop online pharmacies from selling to customers without prescriptions.

Federalization of crime-fighting may be but an intermediate step. U.S. Attorney General Janet Reno recently announced an initiative called LawNet that would connect American and international law enforcement agencies and prosecutors. The recent revelation of the Echelon Project, a network of national intelligence agencies, shocked many who were skeptical of large-scale international coordination. Echelon, led by the National Security Agency, involves the screening of hundreds of thousands of communications, including e-mail, in an effort to identify international terrorists before they strike.

Burgeoning Internet commerce poses several challenges for government, the most vexing of which is tax collection. Sales taxes currently represent a significant share of revenues for states and localities. Ergo, reduced sales tax revenue would be a problematic consequence of a rise in e-commerce. If this occurs, it is likely that states and localities will have to find new sources of revenue, perhaps higher income taxes or property taxes, or the federal government will have to administer a national tax system and distribute revenue. In either event, the politics of taxation would be altered considerably.

Historically, income taxes are unpopular and more difficult to implement than consumption taxes. So a one-to-one substitution for lost sales tax revenue seems unlikely. Moreover, relying on income and property taxes to finance government programs tends to exacerbate inequalities among different-income populations. Public schools' reliance on local property taxes has demonstrated this phenomenon.

If Internet commerce takes off as promised, extending the current moratorium on Net taxes will simply be untenable. Individual state taxation on online trade would be messy and inefficient. Uncle Sam would, perhaps reluctantly, have to intercede. Federal assumption of the sales tax would give Congress an opportunity to redistribute this revenue to suit federal policy interests -- a marked shift from the promised devolution.

Yet taxation is only the tip of the iceberg. All types of economic regulation will require federal (or international) regulation for practical purposes. Consider President Clinton's recent announcement of increased federal regulation of U.S. Internet drug sales. But even this plan -- a response to availability of prescription drugs on more than 400 Web sites -- does not address the myriad sites operating abroad that sell untested or banned drugs. Customs officials intercepted almost 10,000 unauthorized prescription shipments, but they do not offer an estimate of how many more get through to buyers. It is only matter of time before an international pharmaceutical regime is required to test and approve new drugs.

The Net is not the sole technological force at work. Computerized financial markets are increasingly global. Ever-larger freight ships facilitate greater international trade volume. Satellite communications technology improves almost daily. All these developments create parallel pressures to coordinate and consolidate political authority.

The ongoing erosion of political boundaries is only the most recent instance of political change being driven by technological development. The first major assertion of federal power in the United States came in response to the rise of railroads and interstate commerce. Indeed, the Interstate Commerce Act of 1887, passed to bring order to the chaotic climate of the burgeoning industrial economy, proved to be the camel's nose making way for the New Deal.

Now as then, "federalization" of policies, from taxation and crime to regulation, is significant not merely because of growth in the federal bureaucracy. It shifts the dynamics and political strength of relevant constituencies. For example, environmental activists have enjoyed far greater success at the federal level than in many Western states. Gun manufacturers, on the other hand, sued successfully to invalidate tough federal regulations in favor of more accommodating state laws.

The growing pains of the European Union are representative of the challenges to be faced in the coming decades. We tend to regard disputes about British beef or the proper definition of "milk chocolate" with detached amusement. But the Seattle WTO protests demonstrated that American passions can also be roused by seemingly arcane trade rules. Harmonization of standards and rules seems benign in the abstract, but it frequently clashes with our natural appetite for autonomy and self-determination.

The nagging dissonance of ever-larger governing units (be they formal states or treaties or trade regimes) and shrinking units of ethnic, religious and political identification will not likely disappear. As political power migrates upward to federal and trans-national bodies, national and sub-national political units may be left looking for a purpose. Alan Ehrenhalt, editor of Governing Magazine, has noted that local governments will always carry out day-to-day functions such as garbage collection and fire fighting, thus preserving their relevance. But regional and national authorities might try to hold on to power while cultivating narrow, xenophobic worldviews.

This is less threatening in America where a mobile, relatively heterogeneous population is less prone to division. It is notable, however, that the rise of the EU has been accompanied by a resurgence of nativist parties across the continent. Unfortunately, this tension between eroding political borders and heightened ethnic and cultural identification could dominate public affairs for the foreseeable future.