As in 1989, forces are lining up for a huge political and social realignment
There are clear parallels between the current crises and those that preceded the collapse of the Soviet Union
This year has triggered tectonic shifts in the global political economy. A viral pandemic and resulting economic depression, combined with hyper-nationalism and deepseated polarisation, suggest we are in the midst of an eradefining inflection point. There are clear parallels between current events and those that preceded the collapse of the Soviet Union and the end of the Cold War in 1989 and 1990.
Starting with the massacre in Tiananmen Square, followed by the fall of the Berlin Wall, the execution of Romanian leader Nicolae Ceausescu and the release of Nelson Mandela, the winds of change rapidly blew the world into a brave new reality. From business to politics to society — first “gradually and then suddenly ”— the neoliberal era was set into motion.
Fast forward to 2020 and we find ourselves on the horns of a climate emergency; contending with a wave of unprecedented global antiracism protests in the wake of the killing of George Floyd; and simultaneously battling the economic fallout from a global health-care emergency.
The intersectionality of these multiple crises — alongside the escalation in the strategic rivalry between China and the US, and the even larger global struggle between democratic and authoritarian ideals — has created a dangerous cocktail of factors that make the conditions ripe for a “political moment”.
Reflecting on lessons from the past may provide indications of what comes next. After the fall of the Berlin Wall, the world rejected the unfulfilled promises of communism and embraced an era of global liberal democracy, leaving no credible counterweight to the excesses of capitalism. Waves of democratisation swept across Africa, Latin America and Eastern Europe and the Washington Consensus was adopted as the dominant governance model.
Two decades of relative peace and prosperity followed, and continued until the global financial crisis of 2008 exposed the deficiencies of winnertakes-all capitalism, bringing the neoliberal experiment to an abrupt end.
The subsequent combination of fiscal austerity and monetary easing created a climate of resentment towards political and economic elites among citizens accustomed to perpetual improvements in living standards. This, fuelled by social media, gave rise to a populist backlash against the status quo. Though millennial socialism on the Left and nativist nationalism on the Right differ markedly in their approaches to addressing these issues, both place nihilism at the forefront of their thinking.
Now, three seemingly irreversible trends set in motion in 1989 — globalisation, democratisation and capitalism — find themselves under siege. This begs the question: what comes next?
Though neoliberalism may have succeeded in reducing international inequality, it also contributed to increasing domestic inequality, particularly in developed markets, where wages have not kept up with inflation.
As a result, voters are rejecting neoliberal austerity and crony capitalism in favour of more progressive financial socialism that promises to redistribute the spoils of progress.
In Western markets, we see a swing towards more populist expansive monetary policies to fund more generous entitlements (universal basic incomes and free health-care) and big-spending stimulus plans — such as Bernie Sanders’s Green New Deal and the Netherland’s Doughnut economic model — that promise jobs and address growing climate concerns. There is also a tilt towards protectionist policies that place local interests ahead of foreign capital.
Meanwhile, the Chinese Communist Party adopted “venture communism”, allowing some individuals the economic freedom to get rich first (though their companies are still subject to state interests).
So, even as political divisions grow, economic policies seem to be converging on an uneasy, compromise of financial socialism, state capitalism and venture communism, blurring the differences between “capitalist”, “socialist” and “communist”.
The Democracy Index’s 2020 global democracy score (5.44 out of 10) is the lowest recorded since its inception in 2006; only 22 countries remain “full democracies”.
We see a push against inequitable democracy in the West; even as pro-democracy movements are galvanising in East Asia (notably, Hong Kong and Taiwan). This places Eastern Europe, where democracies (notably Hungary and Poland) are falling into totalitarianism, in the middle of the conflict between authoritarian and liberal values,
There is a realisation democracy does not necessarily lead to equitable outcomes, or scale as well as thought. Big nations cannot deny that Chinese-style central governance (or so-called “digital dictatorships” using technology and social credit score systems to manage complex societies) offers efficiencies and policy options not available to full democracies.
However, within every trend lies the seeds of its own destruction; the rise of “strong men ” is being counterbalanced by a shift towards more empathetic politics elsewhere. The communicative leadership style of Jacinda Ardern in New Zealand and the collaborative digital democracy platforms developed by Audrey Tang in Taiwan hint at a future where farsighted leadership could trump regressive populism.
Nonetheless, what digital democracies, empathetic democratic socialists, populists and digital dictatorships all have in common is a shift from individualist to collectivist values.
Of course, the breakdown of globalisation is not limited to the world’s two largest political powers. Brexit highlighted the cracks in the postBerlin EU. Infowarfare between Russia and the US has reawakened old Cold War wounds. Escalating tensions between China and India over land, and China and Australia and Canada over trade, serve as warnings of less global co-operation ahead.
The new geopolitical lines being drawn will not be as simple as East-West, or global North vs global South. Rather, a look at the nations that are supportive of China’s stance on Taiwan and Hong Kong suggests the new fault lines run north-east to south-west, placing China in the centre of the emerging world order, fragmenting what remains of the formerly democratic Western alliances.
Now, in the face of a generational, ideological and geopolitical reset, a new three-pronged problem has emerged. It is similar to the post1989 compromise in its attempts to juggle three new sociopolitical priorities: a desire for greater equality; a requirement for greater sustainability in the face of the climate crisis; and a need for growth to fund the former two and satisfy voters.
As the ideas of the Left and Right battle for dominance, it is clear that growth at all costs is not necessarily compatible with long-run sustainability objectives. Nor, as we have seen in recent decades, is growth neatly inversely correlated with inequality. It appears that whatever policy paths win out, the future policy equilibrium will be just as uneasy as the last compromise.
Gopaldas is a director at Signal Risk, a fellow at the Gordon Institute of Business Science and the co-founder of Mindflux Training. Williams is an economist and foresight lead at Flux Trends.