Chinese medicine for West’s 1930s jitters
The “roaring ’20s, dirty ’30s” was the conceptual ghost that stalked the World Economic Forum (WEF) in Davos in 2017. The 1920s were a time of booming stock markets and huge product innovations, most notably the advent of mass manufacturing of cars such as the Model T and electronics. Huge fortunes were made and huge cities built. It was the era of the Great Gatsby, a time of consumerism and pyrotechnic extravagance.
It was followed, like all good parties, by a massive hangover. Stock markets crashed at the end of the decade, and this was followed by a grinding, decade-long recession. By the end of the 1930s, nationalist political parties had emerged almost everywhere around the world.
What we remember most is the growth of fascist movements in Italy and Germany, but it was also the time of Huey Long in the US, just to take one other example. And lest we forget, 1933 saw the split in the National Party into purist and fusionist elements. Shortly before that, the Carnegie commission found that one-third of Afrikaners lived as paupers.
Events around the world followed the same patterns, and in countries as far afield as Japan and Chile nationalism and militarism grew. The crucial moment, however, was when lingering economic anxiety turned into an outright rebellion against the existing political order. The question for Davos 2017 was essentially this: was 2016 that moment?
It certainly feels like it. The significance of the election of Donald Trump as US president was perhaps the most important underlying talking point. Almost everything hinged on this question: is Trump’s election an indication that the ’30s are returning?
The WEF’s opening report, compiled by 30 or so experts, mentioned this issue specifically. The organisation identified “rising income and wealth disparity” as potentially the biggest driver in global affairs over the next 10 years.
It said getting higher economic growth was “necessary but insufficient” to heal the fractures in society that were evident in the election of Trump and Britain’s vote to leave the EU. The “very nature of capitalism” needs to be reformed to “combat the growing appeal of populist political movements around the world”.
One of the most creepy graphs I saw at the conference was a measure of the level of inequality between the top 1%, the top 0.1% and the top 0.01%, and the rest in the US from 1913 to 2012. It exploded in the ’20s, but guess what? All three measures are essentially back to where they were in 1930, with the latter two, in fact, higher. The 0.01% had 11% of national wealth then and now. The 0.1% had about double that then and now. (http://inequality.org/wealthinequality/)
Yet actual events at the conference took a slightly different turn. Most notably, Chinese leader Xi Jinping launched one of the most spirited defences of globalisation I have ever heard. “Pursuing protectionism is like locking oneself in a dark room,” Xi told the forum. “While wind and rain may be kept outside, so are light and air.”
The historical significance of this and other comments like it in the speech is just extraordinary. Trade with “the West” was obviously almost nonexistent during the Cold War, but this is the country that imposed the canton system in the 18th century to control trade with the West. These controls were established notionally because China didn’t want or need anything Europeans had on offer.
Now, no country is an island. As one friend of mine said, “with communists like this, who needs capitalists?”
Slowly, as the conference progressed, the defence of globalisation began to get more confident. UK Prime Minister Theresa May also pledged to support globalisation and free trade, although doing so seems to me a rejection of what Brexit voters were voting for. They weren’t voting for more globalisation; they were voting for less.
In any event, the emergence of China situating itself as a force in favour of globalisation really turns everything on its head. It will be a fantastically powerful force to counter Trump’s “America first” policy, because that policy will now come with painful consequences.
It stands to reason that China should be taking this stance. The WEF is so dominated by Europeans and Americans it took outsiders to point out that while inequality in developed countries has increased, global inequality has, in fact, declined.
The chief beneficiary of that change has been the 600-million people, mainly Chinese, who have emerged out of poverty over the past two decades. The Chinese now not only have a leader advocating globalisation, they have a powerful interest in advancing it.
A multipolar world has its own dangers, but for the time being, it’s a blessing.
BY THE END OF THE 1930S, NATIONALIST POLITICAL PARTIES HAD EMERGED ALMOST EVERYWHERE AROUND THE WORLD PURSUING PROTECTIONISM IS LIKE LOCKING ONESELF IN A DARK ROOM. WHILE WIND AND RAIN MAY BE KEPT OUTSIDE, SO ARE LIGHT AND AIR