So the election campaign has started. It’s all about fundamental choices, roads ahead, supposed disaster for the economy if one side wins, supposed disaster for the NHS if the other side wins. This will get apocalyptic fairly soon. In truth, there is more of a choice in this election than there has been for a while. There’s no excuse for not voting: there’s a good range of options. This is not a cluttered centre ground election. Even so, the election debate will be quite parochial. There is a bigger set of challenges that are already impacting us enormously. Global power is shifting and it has enormous consequences: we are just largely ignoring them.
Back in September Francis Fukuyama spoke at the RSA in an event chaired by Martin Wolf. It was to showcase his monumental new work Political order and political decay. Martin Wolf has his own new work out: The shifts and the shocks. They are both to be wholeheartedly recommended. Taken together, these works reveal the absence of enormous geo-political change within our domestic political debate.
The crash had a number of interlocking causes: technological change, inequality, and poor regulation. Of much lesser discussion has been the flows of the international systems that have meant savings (surpluses) becoming aggregated in some places and deficits in others. It turns out that balances of payments do matter after all. In reaction to the Asian Financial Crisis of the late 1990s, emerging economies, most significantly China, pursued export-led growth underpinned by exchange rate manipulation in order to accumulate foreign reserves. The financial flows involved in building these reserves became a credit bubble that fuelled a property-led debt bubble in deficit nations such as the UK, Spain, Ireland, and the US. Wolf’s book dissects this process brilliantly.
In response, Wolf describes a new orthodoxy of tighter financial regulation, fiscal austerity and monetary expansion that has emerged as a response to the crisis. His basic argument is that this new orthodoxy is unlikely to be enough. In other words, the system remains substantially unreformed. 2007/8 may just been the first seismic financial event to hit high income countries. Another may be around the corner. And don’t discount one emerging in 2015. A small spark such as Syriza winning the Greek election could spread instability like wildfire.
And the reasons for this are elucidated in Fukuyama’s work. Economic change and mobilisation of social forces can be high speed events. Institutional change is slow. The Eurozone just about staved off collapse but its institutional structure is still woefully inadequate to the task (as Wolf makes clear). The fast and slow of the modern world, a corollary of Kahneman’s fast and slow cognitive systems perhaps, and our limited attention spans mean that the ‘long’ remains largely unaddressed. So the election focuses on visible change (NHS, deficit, wages, growth, and immigration). It completely ignores the acceleration of slow processes that is needed to safeguard our interests in a changing world. Basically, the train came off broken tracks in 2007 and we’ve just put it back on. The resulting derailment is predictable even if the timing isn’t.
Fukuyama points to three features of modern (normatively liberal democratic) political systems that are essential to the needs of a complex society: a competent, autonomous state, the rule of law, and democratic accountability. The problem is that the competent state now needs to confront wider challenges: global power shifts, new security threats, and climate change. A new international structure is necessary to confront these challenges. Yet, this is either not done at all due to collective action constraints (e.g. Congress and climate change) or is done without any comprehensive attempt to develop democratic accountability (e.g. Eurozone heavy-handedness or the Trans-Atlantic Trade and Investment Partnership). So we have the worst of both worlds, a ‘vetocracy’ in Fukuyama’s phraseology but also, where changes are agreed, a democratic lacuna.
One of the functions of populism is to bring ignored issues onto the political agenda which is why UKIP talk incessantly, and completely wrongly, about the fact that none of the mainstream parties talk about immigration. Yet, the net result of right-wing populism more broadly has actually been a narrowing, with political dialogue becoming more parochial, short-term and less consumed by the complexities of the modern world. Other parties and the media have been happy to go along with this. The problem is that those complexities enormously impact on our well-being. They will find us sooner or later. In fact, they already have.
Power is shifting between nations, the nature of power itself is changing, and the political responses we currently have at our disposal are weakening. This is touching the very core of the economy, our ability to manage our own national well-being, and the effectiveness of democracy and political institutions. It might just be all too big to comprehend. I’m sceptical about that. We just haven’t found many, or even any, political leaders who can articulate the situation we face and how we might respond. So this coming election will mainly be about parochial symptoms rather than causes. In other words, it won’t provide many answers.
Anthony Painter is the RSA’s Director of Institutional Reform. You can follow him on twitter@AnthonyPainter