The age of exits

The age of exits

Political philosopher Eric Hobsbawn achieved recognition for his books that described historical epochs in the evolution of social and political institutions. Some of his better known books include The Age of Revolution and The Age of Empire.

Incidentally, 2017 will make 100 years since the Bolshevik revolution. The Bolshevik revolution symbolised the political consensus that was emerging about the role of the state in managing imbalances between the ownership of capital and the mechanisms for distribution of wealth and income in society.

The collapse of the Berlin Wall in 1989, some people argued, was a culmination of a historical process whereby the mobility of labour and capital had been released from its previous restraints.

The fall of the Berlin Wall symbolised the end of tyranny and emphasised the benefits of democracy and public participation in the affairs of the government. Political scientist Francis Fukuyama writing at a time when the Soviet Union had collapsed and regulatory barriers were being torn down, pointed to the end of history.

Political evolution had reached its zenith, he claimed, with the victory of democracy and capitalism. In the aftermath of the fall of the Berlin Wall, the norm of free and fair elections and the rule of law gained credence from Bogota to East Timor.

The credibility of international organisations such as the World Trade Organisation (WTO) was bolstered by the membership of former Communist regimes. The culture of consumerism seeped into the bloodstream of social life further enhancing the appeal of free market capitalism.

If recent events such as the Make America Great Again campaign can serve as a guide, they offer the strongest indications yet that the principles that guided our vision of a multi-polar world have begun to unravel.

Further, the gradual rise of xenophobic tendencies and political movements the world over in recent years points to the reality of disgruntled masses for whom globalisation has been accompanied by a loss of economic security.

To understand the current tendency of nation states such as the United Kingdom to withdraw from the European Union or of others to question the legitimacy of international agreements such the North American Treaty Organisation (NATO), it is useful to examine the underlying tenets of an old debate about the merits of the state and the market.

Like in earlier phases of globalisation — for example, during the age of the empire — the flag followed an expansion in trade. Capital from the first world moved first exclusively in search of commodities and gradually in search of low-cost production platforms in Asia or South America.

However, the Internet, by making it possible for workers to collaborate virtually along the global supply chain, masked changes in productivity, consumption and wages. For example, expansion in outsourced jobs to Vietnam, Sri Lanka or Czech Republic drove increases in productivity, consumption and wages there.

Against this backdrop of countries in the global south and former Communist Bloc that were coming of a low base, economies in the western world were experiencing a secular decline in real wage rates. The seriousness of this trend was masked for a considerable period of time due to developments such as access to cheap housing loans and availability of cheap manufactured goods from countries such as China.

The great deceleration in growth in emerging economies following the 2008 economic crisis was an indication of the “coupling” that had resulted between developed and developing economies since the collapse of Communism in 1989.

The tendency to deregulate in the wake of the fall of the Berlin Wall therefore increased inequality while reducing poverty in aggregate terms especially in the developing world.

But in the western world, widening inequality and stagnant wages led voters to believe in even greater numbers that large bureaucracies in Brussels and Washington DC were out of touch with the reality of higher concentrations of wealth in the hands of the few.

Political lobbies
This disgruntlement is reflected perhaps in the sharp decline in older forms of political mobilisation such as membership in parties and trade unions. The growing power of political lobbies has galvanised populations to question instead whether the state has gone too far in advancing public welfare in the form of healthcare provision or entitlements in the form of a minimum wage.

A significant number of people believe that differences in party ideology cannot explain the disconnect between elected officials and needs of their constituents.

Average consumers in the western world, on the one hand, are being confronted with increasingly more expensive choices in the market place due to a withdrawal of cheap credit that fuelled a decade of consumerism.

On the other hand, in emerging economies where the debate about the comparative benefits of state and market is still at an initial stage, the influence of a decade of foreign investment flows is beginning to take its toll on political decision making.

Witness for example, the recent withdrawal in India from its insistence on income tax collections through the introduction of Value Added Tax (VAT) that has the potential to undermine the role of the state in advancing the interests of the poor.

The age we currently live in has narrowed our differences in terms of economic aspirations but at the cost of ever-growing differences in terms of what we aspire for as citizens of nation states and cities and as expatriates serving global supply chains.

Greater mobility of labour and capital and the discontent it has fuelled is challenging foundational processes of citizenship and state formation as we have known them for a good part of the 21st century.

(The writer is with the United Nations University, Germany)