HAS
THE world witnessed “peak democracy”? Is the future one in which open societies
with free markets vie for influence in global affairs with authoritarian
countries under state capitalism? The very questions evoke a nostalgia for a
seemingly simpler past. For Michael O’Sullivan, formerly an investment banker
and economist at Princeton University, it is more useful to consider the
future.
Mr
O’Sullivan’s book, “The Levelling: What's Next After Globalisation” offers a
roadmap. He sees a multipolar world forming but international institutions
unprepared for this. He voices worries about a world of low growth and high
debt—and calls for a “world treaty on risk” so central banks only resort to
measures like quantitative easing under agreed conditions.
But
his most intriguing framing of the issues is his comparison of today’s world
and 17th century England’s Putney Debates, when the practicalities of a
rights-based democracy were first enunciated by a faction called “ The
Levellers” (which inspired the book’s title). The world, he believes, will
cleave into “Leveller” countries that hew to rights and freedoms, and
“Leviathan” ones that are content with state-managed growth and fewer liberties.
As
part of The Economist’s Open Future initiative, we probed Mr
O’Sullivan ideas in a short interview. Below that is an excerpt from his book,
on the end of globalisation.
*
* *
The
Economist: Describe what comes after globalisation—what does the world
you foresee look like?
Mr
O'Sullivan: Globalisation is already behind us. We should say goodbye
to it and set our minds on the emerging multipolar world. This will be
dominated by at least three large regions: America, the European Union and a
China-centric Asia. They will increasingly take very different approaches to
economic policy, liberty, warfare, technology and society. Mid-sized countries
like Russia, Britain, Australia and Japan will struggle to find their place in
the world, while new coalitions will emerge, such as a “Hanseatic League 2.0”
of small, advanced states like those of Scandinavia and the Baltics.
Institutions of the 20th century—the World Bank, the International Monetary
Fund and the World Trade Organisation—will appear increasingly defunct.
The
Economist: What killed globalisation?
Michael
O'Sullivan: At least two things have put paid to globalisation. First, global
economic growth has slowed, and as a result, the growth has become more
“financialised”: debt has increased and there has been more “monetary
activism”—that is, central banks pumping money into the economy by buying
assets, such as bonds and in some cases even equities—to sustain the
international expansion. Second, the side effects, or rather the perceived
side-effects, of globalisation are more apparent: wealth inequality, the
dominance of multinationals and the dispersion of global supply chains, which
have all become hot political issues.
The
Economist: Was the death of globalisation inevitable or could (and
should) it have been prevented?
Mr
O'Sullivan: One problematic factor here is that there is no central
body or authority to shape globalisation, beyond perhaps the World Economic
Forum or maybe the Organisation for Economic Co-operation and Development. In
many ways, the end of globalisation is marked by the poor and inconclusive
response to the global financial crisis. In general, the response has been to
cut the cost of capital and not to tackle the root causes of the crisis. As
such, the world economy will limp on, burdened by debt and in hock to easy
money from central banks.
The
Economist: The book's title comes from the "Levellers"
during Britain's Putney Debates in the mid 1600s. Who were they and what can
their story teach us today?
Mr
O'Sullivan: The Levellers are a hidden gem from British history. They
were a mid 17th century group in England, who participated in debates about
democracy that took place in a part of London called Putney. Their achievement
was crafting “An Agreement of the People,” which were a series of manifestos
that marked the first popular conceptions of what a constitutional democracy
might look like.
The
Levellers are interesting for two reasons. First, in the context of the time,
their approach was constructive and practical. The “Agreement” spells out what
people want from those who govern them in a clear and tangible way. For
example, they proposed term limits on political office and that laws regarding
indebtedness are applied equally to the rich and poor.
Second,
they are interesting for the way the movement was countermanded and then
snuffed out by the military leader Oliver Cromwell and the Grandees (the elites
of their day). Like so many idealistic political start-ups, the Levellers
failed. This should encourage the growing number of new political parties, like
Change UK and new candidates to be worldy-wise in how they approach the process
of political reform and change.
The
Economist: You foresee new international institutions to replace
archaic 20th-century ones that are suited for a different time. How would they
work? And can countries with such different values (ie, democratic,
market-based "Levellers" and state-managed societies and economies,
the "Leviathans") really cooperate?
Mr
O'Sullivan: A lot is made of the Cold War rivalry between communist
Russia and America, and now some want to see a clash of civilizations between
America and China. The “Levelling” characterises a future where there are at
least two approaches to public life.
The
most distinctive approach to nations doing things in their own way will be for
what the Levellers might call the “rights of freeborn men,” or the idea of the
open society. The code of the Levellers presents a very clear political formula
that Europeans and Americans will recognise for its values, though decreasingly
in its practice.
The
challenge to this code will come from the rising acceptance of less democratic
ways of ordering society, in both developed and developing countries. A related
clash will be the desire of a growing proportion of electorates to have a more
open society as economies also open up.
As
the world evolves along the lines of Leveller-type and Leviathan-type
societies, it is possible that in some countries, such as Russia, a
Leviathan-like approach—that is, order in exchange for reduced democracy and
rights—will be the accepted way of life. In other countries, most interestingly
China, as its economy loses momentum and evolves, there may be a growing
tension between groups holding the Leviathan view (supported inevitably by
Grandees) and opposing Leveller-like groups (who favor equality of opportunity
and a multiparty system). The role and views of women, especially in China, and
of minority groups like the gay community will be pivotal.
The
emergence of a new world order, based on large regions and coloured by Leveller
and Leviathan modes of governance, echoes several periods in history. The
challenge in the next few years will be for Leviathan-oriented nations like
China to maintain economic stability so that rising unemployment, for instance,
does not break the “Leviathan contract”. Equally, the challenge in Leveller
countries will be to maintain open, fraternal societies in the face of
political and potentially economic volatility.
*
* *
Good-bye
to Globalisation
Excerpted
from “The Levelling: What's Next After Globalization” by Michael O'Sullivan
(PublicAffairs, 2019).
It
may well be better that those who have grown fond of globalization get over it,
accept its passing, and begin to adjust to a new reality. Many will resist and,
like the thirty-five foreign-policy experts who published an advertisement in
the New York Times on July 26, 2018, under the banner “Why We Should Preserve
International Institutions and Order,” will feel that the existing world order
and its institutions should be maintained. I disagree. Globalization, at least
in the form that people have come to enjoy it, is defunct. From here, the
passage away from globalization can take two new forms. One dangerous scenario
is that we witness the outright end of globalization in much the same manner as
the first period of globalization collapsed in 1913. This scenario is a
favorite of commentators because it allows them to write about bloody
end-of-the-world calamities. This is, thankfully, a low-probability outcome,
and with apologies to the many armchair admirals in the commentariat who, for
instance, talk willfully of a conflict in the South China Sea, I suggest that a
full-scale sea battle between China and the United States is unlikely.
Instead,
the evolution of a new world order—a fully multipolar world composed of three
(perhaps four, depending on how India develops) large regions that are distinct
in the workings of their economies, laws, cultures, and security networks—is
manifestly underway. My sense is that until 2018, multipolarity was a more
theoretical concept—more something to write about than to witness. This is
changing quickly: trade tensions, advances in technologies (such as quantum
computing), and the regulation of technology are just some of the fissures
around which the world is splitting into distinct regions. Multipolarity is
gaining traction and will have two broad axes. First, the poles in the
multipolar world have to be large in terms of economic, financial, and
geopolitical power. Second, the essence of multipolarity is not simply that the
poles are large and powerful but also that they develop distinct, culturally
consistent ways of doing things. Multipolarity, where regions do things
distinctly and differently, is also very different from multilateralism, where
they do them together.
China,
in particular, is interesting in the context of the switch from globalization
to multipolarity, not least because at the 2017 World Economic Forum the
Chinese president claimed the mantle of globalization for China. China
benefited greatly from globalization and its accoutrements (e.g., WTO
membership), and it played a vital role in the supply-chain dynamic that drove
globalization. However, trade flows into China increasingly betray a move away
from a globalized world and toward a more regionally focused one. For instance,
IMF data show that in 2018, compared with 2011, Cambodia, Vietnam, Laos, and
Malaysia traded more with China and relatively less with the United States.
These countries, together with Bangladesh and Pakistan, have allowed themselves
to be enticed by trade- and investment-based relationships with China and are
now in its orbit.
However,
China is itself not globalized: it is increasingly hard for Western companies
to do business there on equal terms with Chinese companies, and the flow of
both money and ideas—out of and into China, respectively—is heavily curtailed.
Flow of people is another indicator. Flows within China are dynamic and are perhaps
more managed than before, but flows of foreigners into China are miniscule by
comparison to other countries, and China has only recently established an
agency (the State Immigration Administration created at the 2018 Party
Congress) to cultivate inward flows. So as China has become a major pole, it
has become less globalized and arguably is contributing to the trend toward
deglobalization.
On
a broader scale, without picking on individual countries, we can measure the
extent to which the world is becoming multipolar by examining aggregate trends
in trade, GDP, foreign direct investment, government budget size, and
population. All of these are much less concentrated, or more dispersed, than
they used to be, and increasingly they are collecting around several poles. For
example, in the five years from 2012 to 2017, total foreign direct investment
into Australia from China increased at a rate of 21 percent per annum, compared
to 6 percent from the United States to Australia, suggesting that Asian
investment in Australia is picking up.
[…]
Even
if multipolarity is based on the growing dispersion and regionalization of
economic power, it is also expressed in other ways, notably military power,
political and cyberfreedoms, technological sophistication, financial sector
growth, and a greater sense of cultural prerogative and confidence. These are
not as easily measured as economic multipolarity, but some clear strands are
emerging. To try to synthesize what a pole entails, we can point toward several
initial factors: size of a country’s GDP, size of its population, the existence
of an imperial legacy, the extent of its regional economic role, its military
size and sophistication (e.g., absolute spending, number of fighter jets and
ships), its place on the UN Human Development Index relative to its region, and
its participation (or not) in a regional grouping (such as NATO or the European
Union).
Under
this schema the European Union, the United States, China, and potentially India
are poles, but Japan and Russia would not qualify as distinct poles. Russia,
for instance, scores well on certain aspects of multipolarity (e.g.,
militarily), but in its current state it may never become a true pole in the
sense employed here.
[…]
The
path toward multipolarity will not be smooth. One tension is that since the
Industrial Revolution the world has had an anchor point in terms of the locus
and spread of globalization (Britain in the nineteenth century and the United
States in the twentieth century). The fact that there are now at least three
points of reference introduces a new and possibly uncertain dynamic to world
affairs.
The
potential is high for friction, misunderstanding, and conflict among the
increasingly different ways of doing things across the major poles.
Essentially, multipolarity means that instead of speaking a common language,
the major poles speak different policy languages. Trade-based tension is an
obvious possibility here. Another form of tension is the crisis of identity
created for countries that are not wholly within one of the poles—again, Japan,
Australia, and the United Kingdom are the prime examples—and the crisis of
ambition for countries, such as Russia, that want to be poles but lack the
wherewithal to do so convincingly. At a more grassroots level, the implications
of the end of globalization as we know it and the path to multipolarity will
become a greater part of the political debate. At the margin, the flow of
people, ideas, and capital may be less global and more regional and in time
could be reinforced by a growing sense of regionalization across the main
poles. In a negative way, a more multipolar world may be the watershed that
signals the peak of democracy and potentially the beginning of contests within
regions for competing views of democracy, institutional strength, statecraft,
and control.
Jun 28th
2019
by
K.N.C.