The Tory leader told the CBI conference in Birmingham that future prosperity lay in nation states allowing entrepreneurs to operate freely.
Attacking Tony Blair for advocating bigger government and a "world of regional power blocs, single currencies and economic super-powers", Mr Hague predicted: "In the next millennium ... nations will fight each other not for territory but for business, and their weapons will not be guns but tax rates."
In a speech that went down well with delegates, Mr Hague characterised the present Government's approach as the "woolly mammoth" model, the fundamental tenet of which was that "in a big jungle only big beasts survive".
As markets got bigger, so governments must grow bigger and extend the power of the state through higher taxes and the regulation of everything from minimum wages to working hours.
But Mr Hague said the woolly mammoth was extinct because other animals that were fleet of foot, lean and fit survived better than those that were big and lumbering.
The Conservative leader contrasted Labour's "mammoth" approach with the Tories' "dynamic model" built around small companies and individuals exploiting the Internet and e-commerce to enable low-tax, low-regulation nation states to prosper in the new global economy.
Mr Hague went on to repeat his "tax guarantee" - that the share of national income taken by taxes will decline under the next Tory government.
Britain, he said, must become the "tax-cutting trailblazers" of the European Union.
"If we do not cut taxes then Britain will fail. If we do not reject this Government's rising tax burden and stealth taxes, then we cannot prosper in the new economy."
Mr Hague denied this would inevitably mean savage cuts in public spending, insisting that the Tories had no plans to cut education or health spending.
The CBI president, Sir Clive Thompson, said most delegates would "heartily concur" with much of what Mr Hague said.Reuse content