Business Day

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

- Ronak Gopaldas and Bronwyn Williams ●

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.

 ?? Graphic: DOROTHY KGOSI Pictures:123RF/ALPHASPIRI­T and AQUIR ??
Graphic: DOROTHY KGOSI Pictures:123RF/ALPHASPIRI­T and AQUIR

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