How Globalism lost its appeal
Exploring the fundamental reasons behind current turmoil in the West exemplified by the rise of populism and nationalism
Nowadays, when the glory of the ideas of democracy, neoliberalism, and globalism is losing its support not only abroad, but also where these principles used to be most staunchly backed, it is worth asking ourselves the question: why is globalism failing all over the globe?
In the world defined by V. Putin’s revisionism, Xi Jinping’s assertiveness, D. Trump’s disruption and European leaders’ uncertainty, it is becoming increasingly important to comprehend the reasons behind current problems in order to avoid them in the future.
Even Western experts and prominent members of foreign policy establishment of the US and the EU begin to bury liberal world order and believe that unless fundamental changes are implemented the West is doomed.
In the US, Donald Trump’s increasingly nationalist policies are the lesson to the globalist ruling elite of the country that the disregard of mounting internal challenges can eventually result in the rise of populism not only as a one-off event but rather as a radical transformation in the Americans’ perception of globalist ideology.
President Trump’s presidency has long been the subject of criticism for its unconventional approach to US external and internal problems. And in fact, if we take a look at the president’s actions, it becomes clear that the renewed policy is aimed at destroying the previous world order established by the US. Apart from geopolitical consequences, negative repercussions of “America First” are evincing themselves almost everywhere.
Trump’s unilateral decision to pull out from the JCPOA (commonly known as Iran nuclear deal), apart from showing resentment among America’s European allies, further destabilizes the tumultuous Middle East.
At the same time, Washington’s withdrawal from the Paris Climate agreement precipitates long-term detriment to both domestic and global economy and undercuts collective efforts to mitigate the consequences of climate change.
Moreover, for the first time ever the US, the pivotal creator and backer of NATO, as well as the quintessential supporter of the EU, is criticizing its allies, punishing them by levying steel and aluminum tariffs, inflicting damage on their economies by demanding them to pull European businesses out of Iran as part of Washington’s renewed sanctions against the country.
As a result, the relations between hitherto amicable powers have become more hostile, as the American president has recently called the EU “a foe”, and Emmanuel Macron, the French president, proclaimed that Europe should work on the creation of common European army to defend itself against foreign aggression, including the US. Besides, the NATO summit in Brussels has questioned America’s commitment to the idea of common defense, sowing distrust among its allies and letting Russia and China become even more assertive on the international stage.
In spite of Saudi Arabia’s clear involvement in the killing of the journalist J. Khashoggi, Trump has condoned the hideous crime and declared that he is committed to the amelioration of the connections with Riyadh. There is also considerable evidence that Saudi Arabia and its allies support radical Islamic groups and that their actions precipitated humanitarian disaster in Yemen, but little actions have been undertaken by the White House.
In addition, even though the president has adopted “hawkish” China policy on trade and economy issues, he does not care about Beijing’s massive repressions of Muslim minorities and in general does not care much about human rights and liberties.
The White House’s decisive support of Israel undermines the credibility of the US in the Muslim world, while the decision to relocate US embassy to Jerusalem as well as recent recognition of Golan Heights as Israel’s territory has gained support in neither the Middle East nor Europe.
President Trump demises fragile order in the extremely dangerous and intricate region and further exacerbates the problems.
In general, this means that under Trump’s rule the US is no longer the principal backer of liberal and democratic ideals as previously. As Richard Haas has put it,
“America’s decision to abandon the role it has played for more than seven decades thus marks a turning point…The result will be a world that is less free, less prosperous, and less peaceful, for Americans and others alike“. — CFR
At the same time, on the other side of the Atlantic considerable challenges pose threat, unlike in the US, to the very fundamental pivots of the EU.
We already witness the devastating consequences of yet-to-be-achieved Brexit in both the EU and the UK. Goldman Sachs estimates that the UK loses almost $1 billion a week due to turmoil in the country. Brexit drives the EU further apart when coordination and cooperation are necessary and diminishes the EU’s political influence as well as international respect and confidence.
Establishment of populist governments in Italy and Hungary undermine the EU within and disrupt its internal decision-making. Although E. Macron has defeated populist Marine Le Pen in France’s 2017 presidential elections, he is now supported by less than a quarter of the country’s population, and protests of gilets jaunes are expected to continue for a long time. In Germany, support for ultra-right-wing “Alternative for Germany” party has increased dramatically, while the current establishment seems to be losing support. Similar things are happening across the rest of Europe.
Populist parties have tripled their vote in Europe over the past 20 years. They are in government in 11 European countries. More than a quarter of Europeans voted populist in their last elections. — The Gurdian.
And whilst the West is in disarray, anti-globalist, illiberal, authoritarian, repressive regimes in Russia, China, and Turkey are gaining momentum.
Russia, however frustrating it is for the West, has won Syrian Civil War endgame, successfully infiltrated US and European elections and infringed upon international arrangements when it illegally annexed Crimea and engendered civil wars in Donbas.
China has built artificial islands with military bases in international waters and continues to undermine current world order through its Belt and Road Initiative and Made in China 2025 plan.
What is daunting is the fact that China violates the rules of the international system that helped to turn it from an impoverished state into what it is now.
The dramatic emergence of China as a technological, economic, political and military superpower, in addition to growing admiration of V. Putin’s policies, makes ideas of liberalism, globalism, and democracy even more unattractive across the world, as many consider Chinese amazing mix of authoritarianism and capitalism the model to be followed.
Many people now believe that Western democracy is an outdated and ineffective model of governing and blackmail decision of Western governments.
An analyst from Russian state-owned news agency RIA Novosti even went so far as to declare that the West prosperity is based upon resources “looted” by Europeans from their colonies and America’s alleged “profits” from two world wars. So-called “expert”, author of above thoughts, then wrote, “economic systems created in “authoritarian” states demonstrate higher efficiency”.
Above assertions are indeed false, except the fact that authoritarianism has led to the emergence of China as a superpower. However, the effectiveness of the non-democratic system in the long term is questionable. It is clear that when a country encounters hard times, it needs a strong leader with no checks on power who would overcome the challenges of his country. Post-WWII USSR attained tremendous achievements in the field of military and technology, being the first country to launch Sputnik and human into space. It was on par with and even supplanted the US in certain fields. Yet in the end, the Soviet system failed to adapt to the changing realities and in 1991 the USSR disintegrated.
The same thing happened with Asia. South Korea, Taiwan, and Japan, after WWII, also were highly authoritarian states. But because they were able to eventually transition into democracies, they still prosper.
China’s dramatic rise is undoubtedly impressive. Unless Beijing implements reforms that would make its system more open and democratic, it will be harder and harder to sustain growth.
Without doubt, the international rule-based world order has enormously benefited the West, especially in the promotion of its geopolitical and economic interests. However, the Liberal World Order has also created the best-ever international system and we today live in a truly golden age.
As Y. N. Harari has put it,
For the first time in history, … more people commit suicide than are killed by soldiers, terrorists and criminals combined. In the early twenty-first century, the average human is far more likely to die from binding at McDonald’s than from right, Ebola or Al-Qaeda attack.
Nowadays, more people die from sugar diabetes than from all forms of violence. Sugar is more dangerous than gunpowder.
More people die from obesity than from starvation. In 2014, 2.1 billion people were overweight, compared to 850 million who suffered from malnutrition. Famine and malnutrition killed about 1 million people in 2010, whereas 3 million people died from obesity.
However, it seems that globalization and liberal world order has brought about negative repercussions as well, as otherwise, Brexit would not have occurred, D. Trump would not have become the president, populist governments in Italy, Poland, Hungary, and many other countries would not have ascended to power.
So what are the reasons behind the failure of globalism? What have caused fundamental changes in the opinions of people in the US, the UK, and the EU?
Populism and nationalism are the primary opposing forces to globalization; therefore, in this article, I will refer to the rise of populism and failure of globalism as events bearing the same consequences.
Populism and nationalism are now not singular events; instead, their resurgence represents resentment of the populace over mounting challenges that for years have not been addressed properly by Western governments.
These problems include widening inequality, shocks caused by the Global Financial crisis and severe consequences of the Eurozone crisis and of globalization and neoliberalism in general.
There are many dangers emanating from the rise of populism.
First, because many prominent populist leaders are far right, they often embrace authoritarian, nationalist and anti-immigration slogans. This results in more racism and less respect for democratic ideas.
Second, populism is disruptive. Because they present themselves as outsiders, populist advocate radical changes in status-quo and their policies yield dire consequences.
Third, populist rhetoric appeals more to people, because in beautiful words it convinces the populace that problems will be solved in the future. But in reality, populists do not tend to resolve issues. It is their nature to use appealing oratory and later do nothing to mitigate the consequences of the problems they were expected to solve. Populist politicians are often outsiders that do not have a track record and once in office they pursue different policies form what they have promised you. This results in the inability to accomplish promised changes. For instance, D. Trump’s recent tax cut instead of overcoming the challenge creates even more dangerous structural inequality.
In this work, I am going to give a brief overview of the processes that led to the diminished appeal of globalism, democracy and liberalism, and the rise of nationalism, authoritarianism, illiberalism.
Widening inequality deprives ordinary people of opportunities to become more prosperous. Moreover, it exacerbates the negative perception of the ruling elite among ordinary people and in the long term harms economic growth.
By 2015, America’s top 10 percent already averaged more than nine times as much income as the bottom 90 percent. And Americans in the top 1 percent averaged over 40 times more income than the bottom 90 percent.
While the average family income grew 25.7 percent from 1993 to 2015, 52 percent of that total growth was accrued by the top 1 percent of the population. The chart below tracks average income growths and losses during the 22-year period, and then calculates how much of that total growth was accrued by the top 1 percent of the population.
From 2000 to 2006, average wages remained flat. That’s despite an increase of worker productivity of 15 percent. Corporate profits increased 13 percent per year.
Between 1979 and 2007, household income increased 275 percent for the wealthiest 1 percent of households. It rose 65 percent for the top fifth. The bottom fifth only increased 18 percent. That’s true even after “wealth redistribution” which entails subtracting all taxes and adding all income from Social Security, welfare, and other payments. — The Balance
Similar things are happening in Europe, China and in the rest of the world. One of the primary reasons for widening income inequality is the inability of the governments to adapt to the changes in the labor market posed by new technologies. We have seen dramatic rises in workers’ productivity yet the fruits of the progress are going to a handful of people, whilst ordinary people continue to struggle.
The advent of AI is expected to make matters even worse because the AI industry naturally tends to monopolization. Unless authorities undertake actions, we might witness significant social unrest in the late 2020s.
Also, it is important to realize that while globalization has reduced inequality between nations (between the United States and China, for example) it has also increased inequality within nations. This is because corporations prefer low-cost labor of China, India and other Asian countries.
People in both the US and Europe resent very much growing concentration of money and power in the hands of the elite. As a result, we see more anti-establishment sentiments around the world.
FAILURE OF NEOLIBERALISM
There are many economic theories that devise various ways for a country’s growth and subsequent prosperity. From history we know about Keynesian theory, monetarism, classical economic theory, and many other very abstract terms. We also have a myriad of socio-political ideologies: communism, socialism, liberalism, conservatism, etc. But the most ubiquitous yet unnoticed ideology is neoliberalism.
Imagine if people in the USSR did not know what ideology was guiding their lives. Similar things are happening now in the West — no one really realizes that today neoliberalism is the mainstay of economic, social and political processes. Obscurity of neoliberalism is a symptom and cause of its power. It has become so pervasive in our day and age that rarely we discern in it an ideology.
Neoliberalism’s pivots are free markets, deregulation, privatization, free trade, fiscal austerity, liberalization, reduction of government role — in general, all these terms can be called laissez-faire economics.
These principles are considered bridgehead for economic growth. Yet what is paradoxical about neoliberalism is that it declares freedom of choice but is presented as the only possible way for the development.
If you ask an economist about universal approaches to the growth of the economy, in most cases you will hear deregulation, privatization, the establishment of free markets and minimizing the role of the state. Neoliberalism is so widely accepted around the world that not everyone recognizes it as a separate ideology; rather, it is considered a normal state of affairs.
This ideology became widely accepted in the 1980s and spread around the world as a result of IMF’s adoption of its pillars as a prerequisite for giving loans. In addition, the fall of communism and the USSR expanded the appeal of the Western model.
Neoliberalism’s triumph also reflects the failure of the left. When laissez-faire economics led to catastrophe in 1929, Keynes devised a comprehensive economic theory to replace it. When Keynesian demand management hit the buffers in the 70s, there was an alternative ready. But when neoliberalism fell apart in 2008 there was … nothing. This is why the zombie walks. The left and center have produced no new general framework of economic thought for 80 years. — The Guardian
Neoliberalism has been used to describe a wide range of economic policies, including R. Reagan and the Clinton Democrats in the US, M. Thatcher and New Labor Party in the UK, Pinochet in Chile. It has been most popular in the 1990s when financial deregulation and globalization reached their peaks.
Ultimately, financial deregulation culminated in the 2008 Global Financial Crisis and still lingering Eurozone Crisis, whilst the consequences of globalization have been more controversial.
Neoliberal economic policies led to disastrous implications for the world economy. Inequality increased, incomes of the working class have been stagnating, the middle class became poorer and less secure, in spite of sitting GDP and increased labor productivity.
But the direst consequence of neoliberalism is that because the role of the state is diminished, it becomes harder for the government to regain control of the country. This is an unacknowledged political crisis.
In the end, growing resentment with neoliberal economic policies laid the foundation for the rise of populism. People who previously supported establishment now vote for Trump and Brexit, because they are frustrated with inequality, injustice and government failures.
We need the new economic ideology that would not fall into extremes of both socialism and neoliberalism. People want an economic policy that truly represents the interests of the majority. A coherent alternative has to be implemented. For everyone, right or left, Republican or Democrat, the primary objective should be to develop an economic ideology tailored to the demands and realities of the 21st century.
GLOBAL FINANCIAL CRISIS AS THE CRISIS OF CONFIDENCE
The Great Recession has been the most powerful crisis the US has encountered since the Great Depression of the 1930s. Its economic consequences were enormous and they cast a long shadow upon American and global economy. The EU experienced even more severe consequences, as it was then hit by the Eurozone crisis.
By 2016, the crisis cost the US alone almost $5 trillion, about 15% of its GDP. It is difficult to comprehend numbers on such a large scale, so if translated into per capita measurement, the Global Financial Crisis cost every single American around $70000. Europe, especially Greece, Italy, Ireland, Iceland, Spain, and Portugal experienced even larger relative losses.
Nevertheless, apart from disastrous economic consequences, it is worth revisiting the crisis in order to conceive broader social and political effects which still haunt the US, Europe and the rest of the world.
The legacy of the recession should have been re-imagination of the global financial and economic system, as well as rethinking of the functioning of big financial institutions and rules that regulate them. However, in spite of the fact that the US government has succeeded in combating meltdown, there still remains a lot to be done with the financial system.
What is paradoxical with the GFC is that moral concept of justice was overshadowed by the aims to achieve the least negative effects on the economy. Yes, the bailout of the banks was necessary in order to save the economy and prevent another recession; without doubt, the Federal Reserve and US Treasury ultimately ended up with revenues on interests from loans given to banks. But ordinary people still can’t understand why the US government spent trillions of dollars on institutions whose recklessness ignited the crisis.
The concept of justice as fairness was distorted in the eyes of people. It is conventional wisdom that good behavior is rewarded and bad acts are punished. Populace can’t conceive why the US government, instead of punishing banks for their rush for wealth that resulted in the crisis, decided to allocate to them trillions of dollars. They believe in justice as fairness.
Economists and social scientists, on the other hand, think of justice as efficiency, for them, the best outcome is not the one that punishes immoral conduct but the one that maximizes the welfare of people.
Although I do not endorse the point of view that in 2008 policymakers should have been guided by justice as fairness, I am still confused by the fact that the US government did not fire any single CEO of the financial institutions that were responsible for the meltdown. At the same time, I highly appreciate that the US and the EU imposed stricter regulatory measures on banks, such as the Dodd-Frank act of 2010. Nevertheless, more effective measures are still needed and culprits should be appropriately fined and punished.
Even though the economy was saved, the burden of salvation has fallen upon the state and shareholders.
Based upon these contemplations, it appears completely reasonable that many voters will lose their trust in governments and then vote for populists like B. Sanders, D. Trump in the US or B. Johnson in the UK.
It should come as no surprise that frustrated citizens will, in the end, come to rejecting laissez-faire economics and the open frontiers of globalization.
Millions of people lost their jobs, savings, and future prospects. Memories of the GFC will haunt us for decades to come.
Historians will remember the GFC as the moment when faith in globalization, liberalism and open institutions began to fade. But whether the GFC marked the beginning of the new trend or just a temporary deviation from the general course will ultimately depend on how well will US and European policymakers heed the lessons of the past and manage such disasters in the future.
Our society lives in a very dangerous age. Never before since the end of the Cold War has our world been so unstable and insecure. In spite of the fact that the US is still the predominant power, we are now witnessing the formation of the multi-polar world.
This, in turn, poses new dangers. Already precarious balance of power similar to the one that led to WWI and WWII is forming in Asia. Violation of international law has become the norm. Global economy is slowing down. Europe is in disarray. The US faces the identification crisis. China and Rusia are aggressively upending the current world order.
The future is even more unsettling. The advent of AI, climate change and inherent instability make the situation in the world even more precarious.
Therefore, in order to address the mounting challenges our humanity faces we need to redefine the approach of the US and the EU.
We have to resolve the issue of inequality of opportunity, wealth and income. We need to rethink neoliberalism as the primary economic ideology. And many more changes are needed to the economic and foreign policy of primary decision-makers.
This will require fundamental changes in the ways we perceive the world, long-standing conventional wisdom and notions of democracy, globalization, and liberalism.
And, lastly, we need to redefine ourselves. After all, big changes come from small steps.