Tuesday, 8 December 2015

A liberal's lament

By: Zanny Minton Beddoes, Editor-in-Chief, The Economist

Article originally published in The Economist on Nov 2, 2015. 

The open, globalised world faces growing threats – and too little is being done to counter them, warns Zanny Minton Beddoes


Look around the world as 2015 draws to a close, and it is hard for a liberal internationalist to find many reasons for optimism. Yes, digitally driven technological progress – from artificial intelligence to gene editing – is dazzling, and digital access is transforming the lives of ever more people in poor countries. But on three important counts the outward looking globalisation of recent decades is in worryingly poor shape.


The first danger comes from China’s slowdown. By loosening monetary policy and launching yet another stimulus package or two, China will probably avoid a hard landing. But there is little sign of the debt clean-up, state-enterprise reform and overhaul of monopolies that are needed for a service-and consumer-led economy to thrive. China looks set for an ever more sluggish limbo: the old growth model dead, no new one to take its place. 

A slowing China means global GDP growth will struggle to pick up pace and could even slacken further – remaining well below the speed necessary to quell deflationary pressure. That would rattle financial markets and stymie central bankers’ plans. America’s Federal Reserve may raise short-term interest rates by a quarter-point or so, but 2016 will see no serious monetary tightening. In the emerging world, despite floating currencies and fatter reserves, the year will expose vulnerabilities. There will surely be some debt crises (Venezuela? Or even scandal-plagued Malaysia?). More corrosive will be the disappointment that sets in as it becomes clear that the rich world’s economies are losing oomph and that the era of rapid catch-up growth across poor countries is over.


The second concern for the liberal order is in the realm of great-power politics. America is turning inwards just as the global security system it underwrites faces its biggest challenges in a quarter century, from Vladimir Putin’s adventurism in Syria to China’s muscle-flexing in the South China Sea. Mr Putin’s cruise missiles will not win the war for Syria’s dictator, Bashar al-Assad. But they will prolong the conflict, swell the exodus of refugees to Europe and so exacerbate the biggest political crisis the European Union has faced. Across Europe, 2016 will be a year of bitter recriminations and gradual unravelling. Even if the Schengen system of passport-free travel officially remains in place, “temporary” border controls will spread, Europe’s frontiers will be blighted by the barbed-wired perimeters of “migrant processing” camps – and still hundreds of thousands of refugees will stream in. 

The third risk comes from the rich world’s domestic politics. On both sides of the Atlantic, public trust in government has slumped and populist policticians are enjoying growing appeal. One strand of populism is the xenophobic right-wing sort (exemplified by Donald Trump in America or Marine Le Pen in France). Another is a soak-the-rich left –wing type (see Jeremy Corbyn, the hard-left new leader of Britain’s Labour Party or Bernie Sanders, the self-proclaimed democratic socialist who is challenging Hillary Clinton for the Democratic presidential nomination). These people are all tapping into a popular disillusionment with the pragmatic political centre. They have done far better than anyone would have expected even a year ago.

Some of these worries may prove ephemeral. In Britain Mr Corbyn’s party is in opposition and in a mess. America’s presidential primaries are often marked by a noisy populism which gives way to centrism when the general election comes. Some risks will counter each other. Europe’s migrant crisis will force a short-term rise in public spending that will boost demand and mitigate the economic hit from slower growth in China.

Still, it would be a grave mistake to be sanguine, not least because 2016 is a year of high-stakes votes, from America’s presidential election to (possibly) Britain’s in-or-out referendum on EU membership. More than is usual in a single year, decisions in 2016 could, as Barack Obama would say, bend the arc of history. That is why those who believe in an open, liberal world order need to act more boldly in its defence. Top of the list is Mr Obama himself. America’s president is still the single-most important individual defender of liberal internationalism. To uphold it, his remaining year in office needs to be marked by more active American engagement, particularly in the Syrian crisis and in the refugee exodus that it has spawned. 

Liberal internationalist of the world, engage!

Mr. Obama has an exceptional responsibility, but all politicians who value open internationalism need to fight for it. They need to expose the false logic underpinning xenophobia. The evidence, from America’s experience in the early 20th century to the Vietnamese boat people, is unequivocal. Provided they are quickly assimilated and integrated into the workforce, a tide of migrants is an economic boon --- all the more so in ageing societies. Shamefully, Angela Merkel, Germany’s chancellor, is the only European leader brave enough to make this case. If the EU is to survive, others need to join her.

At the same time, the genuine problems of sluggish growth and stagnant wages demand bolder solutions, not populist quick fixes. Big ideas exist, whether large-scale investment in infrastructure or dramatic reforms of education and training. But too many politicians are trapped by a small-bore mentality: a tweak to an existing scheme here, a fiddle with a tax rate there. From the devolution of decision-making to the overhaul of schools, Britain’s Conservative government is the closest the rich world currently comes to a radical-centrist agenda, though it is marred by a misguided desire to cut tax credits for the working poor. Others need to emulate its ambition.

If market-friendly internationalism is to prosper, small-bore will not do. In 2016 it is time for radicalism at the centre

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