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Chen Tianyong, a Chinese real estate developer in Shanghai, boarded a flight to Malta last month with no plans to return anytime soon. After landing, Mr. Chen, a former judge and lawyer, shared on social media a 28-page article explaining himself. “Why I Left China,” read the headline, “An Entrepreneur’s Farewell Admonition,”the New York Times reports:
Many members of the business elite are unhappy that the leadership’s economic policies favor state-owned enterprises even though the private sector drives growth. They are angry that the party is trying to put a Mao-era ideologicalstraitjacket on an economy driven by private enterprises and young consumers. They are upset that the party eliminated term limits last year, raising the prospect that Mr. Xi could become president for life.
“The most important cause of their pessimism is bad policy and bad leadership,” said Minxin Pei, a professor at Claremont McKenna College [and contributor to the NED’sJournal of Democracy] who is in frequent contact with business figures. “It’s clear to the private businesspeople that the moment the government doesn’t need them, it’ll slaughter them like pigs. This is not a government that respects the law. It can change on a dime,”he told the Times.
As our essay this week explains, two decades ago it was possible, even sensible, to imagine that China would gradually free markets and entrepreneurs to play a bigger role. Instead, since 2013 the state has tightened its grip. Government-owned firms’ share of new bank loans has risen from 30% to 70%. The exuberant private sector has been stifled; its share of output has stagnated, and firms must establish party cells which then may have a say over vital hiring and investment decisions.
According to its website, the Vancouver-based United Association of Women and Children has 1,500 members, branches in several provinces and a focus on equal treatment and work opportunities for women — but it lists no contact information. Two B.C. leaders of the non-profit sector dedicated to helping women in business — Laurel Douglas of the Women’s Enterprise Centre and Lisa Niemetscheck of WebAlliance — told the National Post they had never heard of it.
The group seems to have “all the hallmarks” of a front organization to further Beijing’s interests,says Jonathan Manthorpe, whose just-published book,Claws of the Panda, documents China’s influence campaigns.
“Establishing fake civil society NGOs is an established modus operandi” of the United Front, said Charles Burton, a Brock University professor and former Canadian diplomat in Beijing.
Thanks to blockchain, internet users have achieved some victories in the fight against China’s strict internet censorship, notesNir Kshetri, Professor of Management at the University of North Carolina – Greensboro. A historic moment occurred when Peking University‘s former student, Yue Xin, penned a letter detailing the university’s attempts to hide sexual misconduct. The case involved a student, Gao Yan, who committed suicide in 1998 after a professor sexually assaulted and then harassed her, hewrites for the Conversation:
Increasing Chinese leadership in the Middle East is served by a growing interest among the region’s states to pursue the “China Model” at the expense of the “Washington Consensus” that has traditionally defined foreign economic presence in the region,analyst Nicholas Lyall writes for the Diplomat:
TheChina Model– characterized by a strictly controlled political arena, as well as state control of the economy’s commanding heights, accompanying market capitalism – resonates significantly with Middle Eastern governments. Despite the fact that Middle Eastern regimes have largely proven incapable of achieving the state capacity, industrialization, and institutional structures imperative to the success of the China Model, the appeal of Beijing’s economic alternative is likely to remain a source of Chinese soft power that consolidates its economic influence vis-à-vis the US in the Middle East.
Como a nova Rota da Seda torna a Eurásia o novo centro do mundo
Três livros argumentam que o equilíbrio da geopolítica muda com os investimentos da China para integrar o continente.
Redação, The Economist
16 Fevereiro 2019
Indagado como decidiu escrever O Senhor dos Anéis,
J.R.R. Tolkien respondeu: “Eu sabiamente comecei com um mapa e inseri
nele a história”. Portanto, diz Bruno Maçães, quando se imagina novas
realidades é natural começar desta maneira. Hoje um mapa revisado do
mundo deve ter um foco radicalmente diferente dos anteriores – porque um
vasto e integrado subcontinente eurasiano vem provando ser a
característica marcante de uma ordem global emergente.
O presidente da China Xi Jinping
Foto: Feng Li/Reuters
Antes, quando
Oriente era Oriente e Ocidente era Ocidente, o fosso entre os dois não
era somente geográfico, mas também moral e histórico. “Ásia” foi um
termo inventado pelos europeus para enfatizar sua própria
especificidade; para os imperialistas da era Kipling, as sociedades
asiáticas eram atrasadas, despóticas e imutáveis. A Europa, pelo
contrário, havia registrado avanços decisivos ao adotar um enfoque
científico para as questões humanas – o que justificou seu domínio sobre
outros continentes. À condescendência a resposta foi a concorrência.
Desde a Restauração Meiji do Japão, em 1868, a modernização da Ásia por
muito tempo se tornou uma cópia do Ocidente, ou por admiração pelos
europeus ou por repulsa a eles, ou ambas as coisas. As transformações
econômicas desde a 2.ª Guerra Mundial foram moldadas em parte pelas
necessidades dos mercados ocidentais.
Mas
hoje a modernização que a Europa levou no início para a Ásia vem
seguindo o caminho contrário. O continente eurasiano hoje está em
ebulição com novas conexões, graças aos cabos de fibra ótica, gasodutos,
estradas, pontes e zonas de manufatura ligando Oriente e Ocidente. Há
dois anos, um trem de carga iniciava viagem em Yiwu, no leste da China, e
chegava a um terminal ferroviário a leste de Londres. A façanha foi
amplamente simbólica. Ninguém mais duvida que Ásia e Europa estão no
mesmo voo. Esse processo é o pontapé inicial de três novos livros
muito estimulantes, que deixam claro que o mapa da política mundial
como foi traçado há sete décadas não é mais adequado. Do centro do
antigo mapa, como descreve Maçães, o poder dos Estados Unidos irradiava
para a Europa e os extremos orientais da Eurásia, agindo como “uma
espécie de desenvolvimento futuro contra os perigos emanando do seu
núcleo mais profundo”, ou seja, os desafios comunistas representados por
Moscou e Pequim. Hoje a integração cada vez mais profunda do
supercontinente eurasiano que emergiu da Guerra Fria, com todas as
deslumbrantes cidades que brotaram nos desertos, os portos que vêm sendo
construídos ao longo das costas indo-pacíficas, não deveria surpreender
os estudantes do capitalismo e do desenvolvimento. Mas muitos
especialistas ocidentais em previsões erraram ao imaginarem que esse
mundo seria feito à imagem do Ocidente; que ele adotaria não só as teses
econômicas ocidentais, mas também os valores políticos liberais, com
seu suposto apelo e legitimidade universal. Basta olhar para a extensão
de terra da China e da Rússia para ver a insanidade dessa suposição.
Outras potências iliberais, particularmente a Turquia e o Irã, vêm
usando as glórias históricas do passado para evocar um futuro renovado,
projetando poder ao longo de novas rotas da seda. A integração
econômica não está dissolvendo tais diferenças em termos de valores, mas
reforçando. E não está claro que América e Europa conseguirão fazer
muita coisa a respeito. Difundir os ideais democráticos não é uma
prioridade fundamental para os Estados Unidos; o país deseja cada vez
mais exercer poder à distância. A Europa Ocidental está se voltando para
si mesma – profunda ironia – em resposta às crises que eclodem na
Eurásia e chegam até ela, como as ondas de imigrantes e a intromissão da
Rússia nas regiões de fronteira da Europa e sua política interna. Maçães,
cientista político português e antigo ministro do Exterior, esboçou
alguns dos seus argumentos no livro The Dawn of Eurasia (O Despertar da
Eurásia), publicado no ano passado. Em Belt and Road (Cinturão e Rota)
ele examina principalmente o papel da China na remodelação do mundo. Até
agora o projeto que é a marca do país no campo da política externa, é a
iniciativa conhecida como “Um Cinturão, Uma Rota”. Abrangendo diversos
países e US$ 1 trilhão em investimentos prometidos em infraestrutura, o
objetivo é criar uma nova economia global com a China no centro. Apesar
das negativas, esse projeto é também uma peça importante de engenharia
geopolítica. Reflete o desejo da China de moldar seu ambiente externo em
vez de simplesmente se adaptar a ele. Algumas pessoas se antecipam que
esta será a maneira de a China substituir uma ordem internacional
liderada pelos Estados Unidos pela sua própria. Comece com o
mapa e a história o acompanha, como fazia Tolkien. Mas não há nenhum
plano ou trama, diz Maçães. O presidente Xi Jinping e seus acólitos não
são adeptos do determinismo marxista. Lenin é o melhor modelo quando
aproveitam a chance fugaz de mudar o curso da história. Com diz
Peter Frankopan, historiador de Oxford, em The New Silk Roads (As Novas
Rotas da Seda), quando Mike Pompeo, secretário americano de Estado,
anunciou em julho um projeto dos EUA em oposição à Iniciativa “Um
Cinturão, Uma Rota”, a soma prometida foi de US$ 113 milhões em novos
programas – pouco mais do que a renda combinada de Ivanka Trump e Jared
Kuchner. Do mesmo modo que Belt and Road acrescenta ao trabalho anterior
de Maçães, The New Silk Roads também atualiza o magnífico livro de
Frankopan, The Silk Roads (As Rotas da Seda), de 2015, que mudou a
opinião de muitos leitores quanto a onde se situa o centro de gravidade
histórico do mundo. A China vem reprocessando uma velha doutrina.
Segundo o antigo conceito do tianxia, ou “tudo sob o céu”, a China
estava no centro do poder e da civilização. Preceitos morais governavam
as relações entre Estados. Observamos ecos disto nas ideias de Xi
Jinping de uma “comunidade de um futuro compartilhado para a humanidade”
e na constante ênfase nos resultados em que todos ganham, na
dependência e no respeito mútuos. As obrigações dos países dependem do
seu lugar numa rede cujo centro é a China. A gratidão e a
dependência dos outros são convenientes para a China à medida que ela
busca reciclar seu superávit de divisas externas, empregar seus
trabalhadores em canteiros de construção no exterior, garantir matéria
prima e impingir uma produção de baixa qualidade para outros de modo a
manter internamente sua melhor manufatura e melhores serviços de alta
tecnologia. O governo Trump qualifica essa abordagem de “diplomacia da
armadilha da dívida”. Mas esta noção deixa de lado a atração que ela
exerce para muitos beneficiários da generosidade chinesa. No momento
ninguém se mostra tão generoso quanto ela. Além disto, como
afirma Parag Khanna em The Future is Asian (O Futuro é Asiático), em que
faz uma avaliação otimista de uma Grande Ásia, outros países recebem
com simpatia as incursões da China “porque elas dão cobertura para eles
implementarem suas próprias agendas comerciais”. E o fato de Índia,
Japão, Coreia do Sul e Turquia se lançarem numa corrida infraestrutural
armamentista não implica um jogo de soma zero em que uns ganham e outros
perdem. Para Khanna, geoestrategista indiano radicado em Singapura, a
China está “dando o pontapé inicial num processo pelo qual os asiáticos
sairão debaixo da sua sombra”. Khanna mostra-se pouco preocupado
com os inconvenientes do autoritarismo. Ele atribui muita habilidade
tecnocrática às elites da região e analisa superficialmente as brutais
dimensões do desenvolvimento, incluindo a repressão da China contra os
uigures. Mas, num ponto importante, ele concorda com Maçães e Frankopan:
o futuro da Eurásia deverá ser mais maleável e não imutável e
hegemônico. Nesta nova ordem mundial, as ações ainda provocarão reações.
O alinhamento crescente do Japão, Austrália e Índia, países
democráticos, em resposta ao posicionamento mais assertivo da China é
somente um caso em análise. Inevitavelmente, a Eurásia será
coesa, mas não com base na opressiva união baseada no conceito do
tianxia. Em seus aspectos diferentes, esses livros servem como antídoto
aos temores americanos de uma disputa maniqueísta com a China. E
detalham as forças latentes que já são impossíveis de ignorar. TRADUÇÃO DE TEREZINHA MARTINO
DENISE DRESSER is Professor of Political Science at the Autonomous Technological Institute of Mexico.
Read more by Denise Dresser @DeniseDresserG
In 2012, Mexico’s future looked promising. The election of a dashing young president, Enrique Peña Nieto, imbued the country with a new sense of energy and purpose. Back in power after a 12-year hiatus, the Institutional Revolutionary Party, or PRI, had promised to reinvent itself and shun the corrupt authoritarianism it had practiced during the seven decades it ruled Mexico. As the country seemed to reach a consensus on long-delayed structural reforms, the international press heralded “the Mexican moment.”According to the cover of Timemagazine, Peña Nieto was “saving Mexico” by opening up the energy sector to foreign investment, combating monopolies, changing archaic labor laws, and leaving nationalism and crony capitalism in the past.
Just six years later, however, a historic electionswept the PRI from power and delivered a landslide victory to its nemesis, the antiestablishment leader Andrés Manuel López Obrador, and his party, the National Regeneration Movement (MORENA). The election was a sharp rebuketo Peña Nieto, his agenda, and the political and economic system that has been in place since the country transitioned to democracy in 2000. Despite the early promise of Peña Nieto’s modernizing reforms, by 2018, eight in ten voters disapproved of the PRI. The election catalyzed popular anger over frustrated economic expectations, rampant corruption, and a homicide ratethat has made Mexico one of the most violent countries in the Western Hemisphere.
But the vote was about more than merely punishing the PRI for its failings. López Obrador won because he was perceived as an authentic opposition leader: an insurgent politician who for years—including during two previous runs for the presidency—had railed against rapacious elites and a democratic transition gone awry. This time, however, his message in defense of “the people” resonated with wider segments of the Mexican electorate because the ills he diagnosed had become increasingly evident during the Peña Nieto administration.
López Obrador’s promise to shake up the status quo appealed to a restive populationeager for regime change. What it will mean in practice, however, remains unclear. So far, the president-elect’s policy positions have been vague, and his team is unknown and untested. Addressing Mexico’s toxic mix of truncated democracyand crony capitalism will require substantive reform. Many citizens hope that López Obrador will make Mexico’s government and economy genuinely inclusive. Others fear that he will push the country backward by resurrecting dominant-party rule, increasing presidential power, and stoking nationalism. A polarized Mexico is now caught between two forces: anger at those who have governed so badly and fear of those who have just been elected.
UNFULFILLED PROMISES
For decades, Mexico has been plagued by the same set of problems. From 1929 to 2000, single-party rule normalized corruption and stunted the development of Mexican institutions. Even now, the country’s economy produces profound inequality, with wealth concentrated in the hands of a few elites. Power operates through patronage and bribery. There are no adequate checks and balances to hold leaders to account. At the same time, the proliferation of drug-related crime has made violence routine.
Throughout the 1990s, political elites and party leaders focused on changing the rules of electoral competition in Mexico. These efforts culminated in Vicente Fox’s victory in the country’s 2000 presidential election. Fox, a member of the National Action Party (PAN), was the first opposition candidate to defeat the PRI. His victory ended single-party rule and marked the country’s official transition to electoral democracy.
Many believed that the PRI’s defeat would transform the prevailing political and economic system, but that did not prove to be the case. The vices associated with authoritarian rule persisted, including corruption and a lack of transparency and accountability. After Fox’s victory, the Mexican political system became a strange hybrid of authoritarianism and democracy: a system that promoted power sharing among party leaders but did little to guarantee the representation of ordinary citizens.
From 2000 to 2012, the PAN’s approach to governing closely resembled that of the party it had replaced. Patronage, vote buying, and corruption continued. As a result, citizens began to lose faith in the system altogether. According to a government survey from 2011, only four percent of the population had a favorable impression of political parties, and only ten percent believed that legislators governed on behalf of their constituents.
The democratic transition also failed to improve the country’s security situation—in fact, before long it got worse. In 2006, President Felipe Calderón launched a “war on drugs,” deploying the Mexican military to fight powerful drug cartels and end drug-related violence. Instead of solving these problems, the policy, which is still in place, has turned Mexico into a country of graveyards, where mothers sift through dirt to find the remains of their children. In states where the military has conducted operations, the violence has actually increased, as cartels fight both government forces and one another over territory and move on to other illicit activities, such as extortion and kidnapping. Where the armed forces have replaced civilian police officers, ordinary crime has skyrocketed. The army is not trained to carry out police duties, and its incursions to fight the cartels have often produced an escalation in human rights violations.
In the last decade, Mexico has seen over 250,000 homicides and over 34,000 disappearances. More than 140 mayors and candidates for office have been assassinated. And whole swaths of the country, including parts of the states of Guerrero, Michoacán, Morelos, and Tamaulipas, are now controlled by organized crime. Meanwhile, corruption and incompetence in the police forces, the courts, and the military have continued unabated.
PENASTROIKA AND ITS DISCONTENTS
The deteriorating security situation and the PAN’s failure to turn Mexico into a functioning democracy opened the door for a PRI comeback. Peña Nieto promised to help his struggling country join the ranks of the developed world. Immediately after assuming office in 2012, he forged the Pact for Mexico, a legislative accord among the country’s main political parties that approved structural reforms on issues such as energy, labor, tax policy, telecommunications, and education.
The pact was initially celebrated as a political achievement. But although many of the reforms looked good on paper, their design and execution were deeply flawed. Peña Nieto’s proposals conflicted with the vested interests of the same powers that had enabled his ascent to the presidency: the gerontocracy that controlled the labor unions, the monopolists that dominated the Mexican economy, the government-controlled media, and the powerful television duopoly that carefully manufactured his image. These forces were willing to support a light version of the proposed reforms, but they opposed more substantive changes that threatened to undercut their power. As a result, when the reforms reached Congress, where secondary legislation was designed to put them into effect, a legislative branch captured by special interests introduced new rules that diluted the possibility of a deeper impact. Peña Nieto’s cronies defended their privileged positions with the tacit consent of a government that seemed more interested in marketing the approval of the reforms than in making them succeed.
Although not all the reforms failed—energy reform, for example, spurred foreign investment, and telecommunications reform lowered cell phone rates for consumers—their modest achievements pale in comparison to what was promised. Peña Nieto assured Mexicans that he would raise economic growth to six percent per year. Instead, growth has averaged only 1.3 percent per year. Meanwhile, inequality and wealth concentration are on the rise. According to the economist Gerardo Esquivel, ten percent of the Mexican population now controls more than 64 percent of the country’s wealth. In 2002, the fortunes of Mexico’s top 16 multimillionaires represented two percent of GDP; by 2014, that share had risen to nine percent. And the four richest people in Mexico all made their fortunes in sectors regulated or controlled by the government. Mexico now occupies seventh place in The Economist’s index of crony capitalist countries, behind Russia, Malaysia, Ukraine, Singapore, Hong Kong, and the Philippines.
Mexican society is shaped like a pyramid: at the top are a handful of rent seekers, who manipulate the system to increase their personal wealth rather than invest in the economy or support innovation. At the base, meanwhile, are the 52 million Mexicans who live below the poverty line—21 million of whom survive on less than $2 a day. According to a 2015 Oxfam report, only one in five Mexicans can be considered not poor or vulnerable to poverty. Successive reformist governments have failed to address the persistence of manipulated, highly concentrated markets. Growth is not possible when the state cannot ensure equality, regulate monopolies, or guarantee the transparency of economic transactions. Under Peña Nieto and his predecessors, pervasive cronyism crippled reformist efforts. Even good intentions delivered bad results.
IT'S THE CORRUPTION, STUPID
In Mexico, paradoxically, more democracy has meant more corruption. The democratic transition did not stop the transfer of public wealth into private pockets; instead, it exacerbated and normalized that historical practice. Although democratic theory suggests that pluralism and political competition help combat corruption, Mexico demonstrates that in the absence of the rule of law, they actually incite further rapacity.
In Mexico’s fledgling democracy, corruption has spread from the executive branch to the legislature, the judiciary, state and local governments, and even the media. As the legislative branch has gained more power over how money is spent, illegal appropriations for political use have multiplied. Decentralizing the federal budget to the states has opened up new opportunities for local leaders to do business with public funds. Instead of providing checks and balances against corruption, the federal and local legislatures have been the beneficiaries of government largess. The same is true of the 32 governors who receive large amounts of federal funds, which they use at their own discretion.
According to the nongovernmental organization México ¿Cómo Vamos? (Mexico, How Are We Doing?), corruption eats up nine percent of Mexico’s GDP. It deters foreign investment, hampers economic growth, and limits the benefits of the North American Free Trade Agreement. The World Economic Forum says that corruption is the main factor that makes it hard to do business in Mexico.
During the Peña Nieto administration, however, corruption, which had long been considered normal, was increasingly denounced as it became more public and less constrained. According to the nongovernmental organization Mexicanos Contra la Corrupción y la Impunidad (Mexicans Against Corruption and Impunity), corruption has reached alarming levels in the last six years. Mexico is currently ranked 135 out of 180 countries on Transparency International’s Corruption Perceptions Index; 90 percent of Mexican citizens believe that corruption is one of the country’s primary problems. This concern is not unwarranted. During the Peña Nieto administration, the governor of Veracruz, Javier Duarte, allegedly embezzled millions of dollars of public funds, and more than a dozen other governors and former governors, many of whom Peña Nieto praised as examples of the new PRI, are now under investigation or hiding from the authorities. The president’s own family has been implicated: in 2014, the so-called Casa Blanca scandal revealed that the president’s wife had purchased a $7 million house from a favored government contractor.
Under Peña Nieto and his predecessors, pervasive cronyism crippled reformist efforts.
Peña Nieto attempted to avoid responsibility for these scandals by arguing that corruption was a cultural issue. Instead of reforming bad rules or designing better laws, he blamed amoral citizens. But corruption is the product of incentives, not habits; it’s about what authorities sanction, not what society condones. And under Peña Nieto, Mexican authorities were willing to tolerate a staggering level of official wrongdoing. Consider, for example, the massive scandal involving the Brazilian construction company Odebrecht, which has admitted paying more than $800 million in bribes to government officials in various countries. The case has shaken up politics throughout the region, bringing down presidents and prominent members of the political elite. But in Mexico, not a single politician or contractor has been indicted, owing to pressure on law enforcement authorities from high-level officials who fear that a real investigation would be damaging to the PRI. What the Mexican media have dubbed “a pact of impunity” protects the political class regardless of party or ideology, undermining public trust in government institutions.
The starkest example of official impunity is the case of the 43 studentsfrom Ayotzinapa Rural Teachers’ College who disappeared in 2014 and whose fate remains unknown. After massive protests erupted over the incident, Peña Nieto’s government brought in a panel of independent international experts to review the case. But when the experts began to cast doubt on the government’s handling of the investigation, authorities made it impossible for them to carry out their work and ultimately forced them out of the country.
ENTER AMLO
During the 2018 election, López Obrador became the candidate of choice for the majority of voters, who were frustrated with the current state of affairs. Decades of corruption and the failures of the Peña Nieto government allowed López Obrador to cast himself as the redeemer of a fundamentally flawed system.
The election results were a crushing defeat for the PRI, which did not win a single governorship out of the nine in contention or any of the 300 federal electoral districts. The party even lost in Atlacomulco, Peña Nieto’s hometown. The PRI will become the fifth-largest party in Congress after being dominant for 89 years.
For López Obrador, the results were a triumph. MORENA earned 53 percent of the vote, versus the PRI’s 16 percent, and it received 30 million votes, significantly more than the 15 million that Fox obtained in 2000. López Obrador’s party and its coalition allies will have an absolute majority in Congress, with over 300 seats out of 500, and a majority in the Senate. After 24 years of divided rule, López Obrador will enjoy a unified government, which will have the capacity to pass laws and approve the budget with little opposition.
López Obrador’s victory can be explained by both what happened during the race and what failed to happen over the last 30 years. There is no question that his opponents ran disastrous campaigns. Ricardo Anaya, the candidate of a center-right–center-left alliance that had been forged among the PAN, the Party of the Democratic Revolution, and the Citizens’ Movement, was viewed as smart but robotic—someone who connected more easily with Silicon Valley executives than with his disgruntled fellow citizens. And he was never credible as a transformative opposition leader, given the 12 years of PAN rule that came before. Meanwhile, the PRI candidate, José Antonio Meade, bore the brunt of Peña Nieto’s unpopularity and the tarnished PRI brand.
López Obrador, on the other hand, assembled a team of moderates who tempered his strident tendencies and explained his policies in a way that made them seem more acceptable and less radical. MORENA transitioned from purism to pragmatism and created a broad, multiclass, and ideologically vague coalition that was capable of drawing in both conservative evangelicals and progressive civic activists. U.S. President Donald Trump’s demonization of Mexico also helped López Obrador, whose brand of nationalism resonated among those who felt offended by Trump’s tirades and Peña Nieto’s mild response to them. López Obrador also won support by defending the oil industry in the face of energy reforms that many viewed as benefiting only foreign investors and their domestic allies.
But something more profound lies at the root of this political reconfiguration. López Obrador’s message and personality have been the same since he became an opposition leader in 2006. But what seemed radical in 2006 feels necessary in 2018. What once provoked fear now engenders hope. The majority of the electorate supported López Obrador because his bleak diagnosis corresponded with the violence, corruption, and insecurity that ordinary Mexicans experience every day.
Members of Mexico’s traditional ruling class did not understand that lambasting López Obrador as a populist would not prevent him from reaching the presidency; they should have instead addressed the grievances he exploited. But they did little to make the economic system more inclusive or the political system more representative. López Obrador’s ascent is the predictable consequence of failed modernization. Greedy, antidemocratic elites should have seen it coming.
THE ROAD AHEAD
Despite his landslide victory, López Obrador remains a polarizing figure. His critics view him as a divider and a class warrior; his supporters cherish him as an unwavering champion of democracy and social justice. For some, he is a wolf in sheep’s clothing; for others, he represents a radical and long-desired break with the old regime.
López Obrador’s victory will almost certainly alter the party system and the existing economic model. But the specific nature of that change is difficult to predict. When it comes to policy, López Obrador has been erratic and often contradictory. As mayor of Mexico City from 2000 to 2006, he was a pragmatic leader, and his team today mostly consists of moderates. Now, however, there will be pressure from his base to disavow many of the reforms implemented during the Peña Nieto administration. López Obrador has said that he will support the North American Free Trade agreement, but he has also hinted that protectionist measures might be necessary to invigorate the domestic market and promote food security. Ultimately, he is a social leader drawn to grand narratives, not to the specifics of public policy. It will be up to his inexperienced cabinet to maintain the delicate balance between the changes that Mexicans demand and the macroeconomic stability that investors expect.
In his victory speech, López Obrador espoused the language of reconciliation, declaring that he would seek a peaceful and orderly transition and that he would not “govern arbitrarily.” But there is no question that he will have a great deal of discretionary power. Along with the smaller parties in his electoral coalition, he may even have enough votes to modify the constitution.
Although the PRI and the PAN retained a small presence in the legislature and still control a number of governorships, the opposition has been decimated, and it could become even smaller as members flee to join MORENA. López Obrador’s party is on its way to becoming a new version of the old PRI: a hegemonic party that crowds out competition by uniting disparate political factions under a pragmatic umbrella. Patronage and corruption held the PRI together, and MORENA has not signaled that it will break with those practices; in fact, it is well positioned to emulate and embrace them. López Obrador has not broken ties with union leaders associated with government graft or acted against members of his own party accused of using public funds for personal gain.
For those worried about Mexico’s dysfunctional democracy, there are some troubling signs. López Obrador has promised to return power to the people by submitting key policy issues to public referendums. This practice could push the country toward majoritarian extremism, in which democracy is seen as a constant confrontation between the popular will and those who oppose it, rather than as an inclusive system of negotiation and compromise. During the campaign, López Obrador portrayed institutions such as the Supreme Court and the National Institute for Transparency, Access to Information, and Personal Data Protection as obstacles, vilified the media outlets that criticized him, and suggested that his personal moral rectitude meant that he should be granted broader discretionary powers than his predecessors.
But much of what he has promised, including an end to corruption and violence, will require significant modifications to Mexico’s institutions, which were created in an era of single-party rule. Unless the government promotes an agenda focused on transparency, accountability, institutional remodeling, and the protection of individual rights, Mexico will simply replace one unaccountable party with another. Some of López Obrador’s critics have warned that he might turn Mexico into another Venezuela, where the authoritarian leader Nicolás Madurohas dismantled democratic institutions and bankrupted the state, pushing society to the brink of collapse. The real risk for Mexico, however, is not that it will become another Venezuela; it is that it will simply remain the same old Mexico.
To prevent this outcome, López Obrador would be well advised to take a new approach when he assumes office on December 1. The centerpiece of this agenda should be the establishment of an autonomous attorney general’s office with the authority to investigate and prosecute corruption at the highest levels. In addition, he should push for the passage of legislation, currently stalled in Congress, that would make the national anticorruption system fully functional. He will also need to name an anticorruption czar and guarantee that the position has teeth. Finally, López Obrador should rethink the war on drugsby gradually returning the military to the barracks and, at a minimum, legalizing marijuana for medicinal and recreation.
Mexico will experience truly transformative change only if its new leaders focus on strengthening the rule of law. The biggest mistake López Obrador can make would be to delegitimize democracy by relying on referendums and centralizing power in his own office. Much of the positive change that Mexico has experienced since 2000 was the result of pressure from below, fomented by an increasingly vibrant and demanding civil society. The country’s future does not depend on one man or one movement. Mexico needs a broad, pro-democracy coalition that addresses the root cause of its polarized politics: the absence of institutions that are capable of providing transparency, accountability, and systemic checks and balances. The Mexican people need to put pressure on López Obrador to make good on his bold promises. The Mexican novelist Juan Rulfo once wrote, “It had been so long since I lifted my face that I forgot about the sky.” If Mexicans do not look upward and demand more, those who govern won’t do so, either.
O The Economist virou uma espécie de Almanaque Capivari para os empresários brasileiros da modalidade "civilizada-liberal-contemporânea". Mestre J. R. Guzzo, no alvo, em artigo publicado na edição impressa da revista Exame:
O que aconteceria num país que teve quase catorze anos seguidos da mais ruinosa administração econômica que se possa imaginar, com direito à maior recessão na história de sua economia? Além das repetidas tentativas de suicídio econômico, armou-se ao longo deste período o que provavelmente tenha sido o mais alucinante sistema de corrupção jamais visto na administração pública mundial. A máquina do Estado foi privatizada em favor dos partidos que apoiavam os governos, primeiro o do ex-presidente Lula e depois o de Dilma Rousseff. Milhares de cargos públicos foram entregues a militantes do PT e outros coletivos de esquerda. Bilhões de reais desapareceram do Tesouro Nacional e foram acabar nos bolsos de dirigentes de “movimentos sociais”, ONGs, governantes de países estrangeiros que não se submetem à lei internacional, ditadores africanos, filhos de ditadores africanos que são pegos na alfândega do Brasil com malas abarrotadas de dinheiro vivo. O ex-presidente está na cadeia, condenado a doze anos por corrupção e lavagem de dinheiro. Estão presos ex-ministros, diretores de estatais e outros barões do seu governo, quase todos réus confessos ─ e por aí afora. Muito bem. A única resposta possível para a pergunta feita no parágrafo inicial, dentro da lógica comum, é a seguinte: na primeira eleição que aparecesse, os responsáveis diretos pelas calamidades descritas acima receberiam da maioria dos eleitores uma ordem clara de cair fora do governo e ficar o mais longe possível dele, de preferência para sempre. Mas o país dessa história é o Brasil, e no Brasil as coisas raramente fazem nexo.
O problema não está tanto no comportamento do eleitorado, que segundo as “pesquisas de intenção de voto” põe numa situação privilegiada, quase de favorito, o candidato que promete abertamente ressuscitar a catástrofe dos governos Lula e Dilma. Num eleitorado em que a maioria dos 150 milhões de votantes não têm nenhum preparo para escolher nada, qualquer farsante bem treinado para mentir mais que os outros candidatos sempre terá chances excelentes de ganhar. O curioso, na atual eleição presidencial, é que grande parte da elite empresarial brasileira ─ aquela que se imagina mais avançada, vê a si própria como merecedora de uma cota de sócia no mundo civilizado, lê os jornais e revistas de Nova York ou Londres, etc., etc., etc. ─ esteja achando que o candidato que promete voltar ao governo passado é o mais adequado para ocupar o governo futuro. Não que Fernando Haddad seja o homem ideal, claro. Nossos mais distintos magnatas e seus guias espirituais prefeririam um Emmanuel Macron, digamos, ou coisa que o valha; mas Monsieur Macron não está disponível. A saída, então, é se arrumar com esse Haddad mesmo. É verdade que ele tem, entre todos os candidatos, o mais bem armado projeto de destruição do Brasil. O que se vai fazer, porém? A alternativa é eleger um homem de extrema direita ─ e isso deixa passando mal os nossos capitães de indústria, comércio e finanças ─ ou, pelo menos, é o que dizem. Haddad, imaginam, é uma pessoa com quem daria “para conversar”.
De mais a mais, é essa a instrução que recebem no momento do The Economist─ e nos últimos anos, por razões de ordem psicológica que talvez sejam melhor esclarecidas no futuro, o The Economist virou uma espécie de Almanaque Capivari para os empresários brasileiros da modalidade “civilizada-liberal-contemporânea”. Acreditam no que é publicado ali como se acredita na tábua de marés da Marinha Nacional ─ e ali estão dizendo que Haddad, além de ter sido um prefeito “de êxito” em São Paulo, poderia inclinar-se para uma abordagem mais liberal da economia. Quem pode levar a sério um disparate desses? Mais gente do que você pensa. Empreiteiros de obras públicas, banqueiros preocupados em manter o monopólio que tanto dinheiro lhe deu nos governos Lula-Dilma, fornecedores de sondas nacionais para a Petrobras, Joesleys, Eikes e todo o resto da turma estão prontos para assinar embaixo.
Liberalism made the modern world, but the modern world is turning against it. Europe and America are in the throes of a popular rebellion against liberal elites, who are seen as self-serving and unable, or unwilling, to solve the problems of ordinary people. Elsewhere a 25-year shift towards freedom and open markets has gone into reverse, even as China, soon to be the world’s largest economy, shows that dictatorships can thrive.
For The Economist this is profoundly worrying. We were created 175 years ago to campaign for liberalism — not the leftish “progressivism” of American university campuses or the rightish “ultraliberalism” conjured up by the French commentariat, but a universal commitment to individual dignity, open markets, limited government and a faith in human progress brought about by debate and reform.
Our founders would be astonished at how life today compares with the poverty and the misery of the 1840s. Global life expectancy in the past 175 years has risen from a little under 30 years to over 70. The share of people living below the threshold of extreme poverty has fallen from about 80% to 8% and the absolute number has halved, even as the total living above it has increased from about 100m to over 6.5bn. And literacy rates are up more than fivefold, to over 80%. Civil rights and the rule of law are incomparably more robust than they were only a few decades ago. In many countries individuals are now free to choose how to live — and with whom.
This is not all the work of liberals, obviously. But as fascism, communism and autarky failed over the course of the 19th and 20th centuries, liberal societies have prospered. In one flavour or another, liberal democracy came to dominate the West and from there it started to spread around the world.
Laurels, but no rest
Yet political philosophies cannot live by their past glories: they must also promise a better future. And here liberal democracy faces a looming challenge. Western voters have started to doubt that the system works for them or that it is fair. In polling last year just 36% of Germans, 24% of Canadians and 9% of the French thought that the next generation would be better off than their parents. Only a third of Americans under 35 say that it is vital they live in a democracy; the share who would welcome military government grew from 7% in 1995 to 18% last year. Globally, according to Freedom House, an NGO, civil liberties and political rights have declined for the past 12 years — in 2017, 71 countries lost ground while only 35 made gains.
Against this current, The Economist still believes in the power of the liberal idea. Over the past six months, we have celebrated our 175th anniversary with online articles, debates, podcasts and films that explore how to respond to liberalism’s critics. In this issue we publish an essay that is a manifesto for a liberal revival — a liberalism for the people.
Our essay sets out how the state can work harder for the citizen by recasting taxation, welfare, education and immigration. The economy must be cut free from the growing power of corporate monopolies and the planning restrictions that shut people out of the most prosperous cities. And we urge the West to shore up the liberal world order through enhanced military power and reinvigorated alliances.
All these policies are designed to deal with liberalism’s central problem. In its moment of triumph after the collapse of the Soviet Union, it lost sight of its own essential values. It is with them that the liberal revival must begin.
Liberalism emerged in the late 18th century as a response to the turmoil stirred up by independence in America, revolution in France and the transformation of industry and commerce. Revolutionaries insist that, to build a better world, you first have to smash the one in front of you. By contrast, conservatives are suspicious of all revolutionary pretensions to universal truth. They seek to preserve what is best in society by managing change, usually under a ruling class or an authoritarian leader who “knows best”.
An engine of change
True liberals contend that societies can change gradually for the better and from the bottom up. They differ from revolutionaries because they reject the idea that individuals should be coerced into accepting someone else’s beliefs. They differ from conservatives because they assert that aristocracy and hierarchy, indeed all concentrations of power, tend to become sources of oppression.
Liberalism thus began as a restless, agitating world view. Yet over the past few decades liberals have become too comfortable with power. As a result, they have lost their hunger for reform. The ruling liberal elite tell themselves that they preside over a healthy meritocracy and that they have earned their privileges. The reality is not so clear-cut.
At its best, the competitive spirit of meritocracy has created extraordinary prosperity and a wealth of new ideas. In the name of efficiency and economic freedom, governments have opened up markets to competition. Race, gender and sexuality have never been less of a barrier to advancement. Globalisation has lifted hundreds of millions of people in emerging markets out of poverty.
Yet ruling liberals have often sheltered themselves from the gales of creative destruction. Cushy professions such as law are protected by fatuous regulations. University professors enjoy tenure even as they preach the virtues of the open society. Financiers were spared the worst of the financial crisis when their employers were bailed out with taxpayers’ money. Globalisation was meant to create enough gains to help the losers, but too few of them have seen the pay-off.
In all sorts of ways, the liberal meritocracy is closed and self-sustaining. A recent study found that, in 1999–2013, America’s most prestigious universities admitted more students from the top 1% of households by income than from the bottom 50%. In 1980–2015 university fees in America rose 17 times as fast as median incomes. The 50 biggest urban areas contain 7% of the world’s people and produce 40% of its output. But planning restrictions shut many out, especially the young.
Governing liberals have become so wrapped up in preserving the status quo that they have forgotten what radicalism looks like. Remember how, in her campaign to become America’s president, Hillary Clinton concealed her lack of big ideas behind a blizzard of small ones. The candidates to become leader of the Labour Party in Britain in 2015 lost to Jeremy Corbyn not because he is a dazzling political talent so much as because they were indistinguishably bland. Liberal technocrats contrive endless clever policy fixes, but they remain conspicuously aloof from the people they are supposed to be helping. This creates two classes: the doers and the done-to, the thinkers and the thought-for, the policymakers and the policytakers.
The foundations of liberty
Liberals have forgotten that their founding idea is civic respect for all. Our centenary editorial, written in 1943 as the war against fascism raged, set this out in two complementary principles. The first is freedom: that it is “not only just and wise but also profitable…to let people do what they want.” The second is the common interest: that “human society…can be an association for the welfare of all.”
Today’s liberal meritocracy sits uncomfortably with that inclusive definition of freedom. The ruling class live in a bubble. They go to the same colleges, marry each other, live in the same streets and work in the same offices. Remote from power, most people are expected to be content with growing material prosperity instead. Yet, amid stagnating productivity and the fiscal austerity that followed the financial crisis of 2008, even this promise has often been broken.
That is one reason loyalty to mainstream parties is corroding. Britain’s Conservatives, perhaps the most successful party in history, now raise more money from the wills of dead people than they do from the gifts of the living. In the first election in unified Germany, in 1990, the traditional parties won over 80% of the vote; the latest poll gives them just 45%, compared with a total of 41.5% for the far right, the far left and the Greens.
Instead people are retreating into group identities defined by race, religion or sexuality. As a result, that second principle, the common interest, has fragmented. Identity politics is a valid response to discrimination but, as identities multiply, the politics of each group collides with the politics of all the rest. Instead of generating useful compromises, debate becomes an exercise in tribal outrage. Leaders on the right, in particular, exploit the insecurity engendered by immigration as a way of whipping up support. And they use smug left-wing arguments about political correctness to feed their voters’ sense of being looked down on. The result is polarisation. Sometimes that leads to paralysis, sometimes to the tyranny of the majority. At worst it emboldens far-right authoritarians.
Liberals are losing the argument in geopolitics, too. Liberalism spread in the 19th and 20th centuries against the backdrop first of British naval hegemony and, later, the economic and military rise of the United States. Today, by contrast, the retreat of liberal democracy is taking place as Russia plays the saboteur and China asserts its growing global power. Yet rather than defend the system of alliances and liberal institutions it created after the second world war, America has been neglecting it — and even, under President Donald Trump, attacking it.
This impulse to pull back is based on a misconception. As the historian Robert Kagan points out, America did not switch from interwar isolationism to post-war engagement in order to contain the Soviet Union, as is often assumed. Instead, having seen how the chaos of the 1920s and 1930s bred fascism and Bolshevism, its post-war statesmen concluded that a leaderless world was a threat. In the words of Dean Acheson, a secretary of state, America could no longer sit “in the parlour with a loaded shotgun, waiting”.
It follows that the break up of the Soviet Union in 1991 did not suddenly make America safe. If liberal ideas do not underpin the world, geopolitics risks becoming the balance-of-power, sphere-of-influence struggle that European statesmen grappled with in the 19th century. That culminated in the muddy battlefields of Flanders. Even if today’s peace holds, liberalism will suffer as growing fears of foreign foes drive people into the arms of strongmen and populists.
It is the moment for a liberal reinvention. Liberals need to spend less time dismissing their critics as fools and bigots and more fixing what is wrong. The true spirit of liberalism is not self-preserving, but radical and disruptive. The Economist was founded to campaign for the repeal of the Corn Laws, which charged duties on imports of grain into Victorian Britain. Today that sounds comically small-bore. But in the 1840s, 60% of the income of factory workers went on food, a third of that on bread. We were created to take the part of the poor against the corn-cultivating gentry. Today, in that same vision, liberals need to side with a struggling precariat against the patricians.
Liberals should approach today’s challenges with vigour. If they prevail, it will be because their ideas are unmatched for their ability to spread freedom and prosperity
They must rediscover their belief in individual dignity and self-reliance — by curbing their own privileges. They must stop sneering at nationalism, but claim it for themselves and fill it with their own brand of inclusive civic pride. Rather than lodging power in centralised ministries and unaccountable technocracies, they should devolve it to regions and municipalities. Instead of treating geopolitics as a zero-sum struggle between the great powers, America must draw on the self-reinforcing triad of its military might, its values and its allies.
The best liberals have always been pragmatic and adaptable. Before the first world war Theodore Roosevelt took on the robber barons who ran America’s great monopolies. Although many early liberals feared mob rule, they embraced democracy. After the Depression in the 1930s they acknowledged that government has a limited role in managing the economy. Partly in order to see off fascism and communism after the second world war, liberals designed the welfare state.
Liberals should approach today’s challenges with equal vigour. If they prevail, it will be because their ideas are unmatched for their ability to spread freedom and prosperity. Liberals should embrace criticism and welcome debate as a source of the new thinking that will rekindle their movement. They should be bold and impatient for reform. Young people, especially, have a world to claim.
When The Economist was founded 175 years ago our first editor, James Wilson, promised “a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress.” We renew our pledge to that contest. And we ask liberals everywhere to join us.
IN SEPTEMBER 1843 James Wilson, a hatmaker from Scotland, founded this newspaper. His purpose was simple: to champion free trade, free markets and limited government. They were the central principles of a new political philosophy to which Wilson adhered and to which The Economist has been committed ever since. That cause was liberalism.
Today liberalism is a broad faith—far broader than it was to Wilson. It has economic, political and moral components on which different proponents put different weights. With this breadth comes confusion. Many Americans associate the term with a left-wing belief in big government; in France it is seen as akin to free-market fundamentalism. But whatever version you choose, liberalism is under attack.
The attack is in response to the ascendancy of people identified by their detractors, not unreasonably, as a liberal elite. The globalisation of world trade; historically high levels of migration; and a liberal world order premised on America’s willingness to project hard power: they are all things that the elite has sought to bring about and sustain. They are things the elite has done well out of, congratulating itself all the while on its adaptability and openness to change. Sometimes it has merely benefited more visibly than a broad swathe of lesser souls; sometimes it has done so at their expense.
Populist politicians and movements have won victories by defining themselves in opposition to that elite: Donald Trump over Hillary Clinton; Nigel Farage over David Cameron; the Five Star Movement over the Brussels bureaucracy; Viktor Orban over George Soros, who was not actually running in the Hungarian elections last April but personifies that which Mr Orban despises, and is Jewish to boot. The populists deride the leaders of the past as obsessed with bossy political correctness and out of touch with what matters to ordinary people; they promise their voters the chance to “take back control”. Meanwhile rising powers—as well as Russia, which though in decline is still dangerous—seek to challenge, or at least amend, the liberal world order. And in the near future the biggest economy in the world will be China, a one-party dictatorship. In all these ways the once-barely-questioned link between economic progress and liberal democracy is being severely put to the test. The Economist marks its 175th anniversary championing a creed on the defensive.
So be it. Liberalism has succeeded by serially reinventing itself while staying true to what Edmund Fawcett, a former journalist at this newspaper, identifies in his excellent history of the subject as four key elements. The first is that society is a place of conflict and that it will and should remain so; in the right political environment, this conflict produces competition and fruitful argument. The second is that society is thus dynamic; it can get better, and liberals should work to bring such improvement about. The third is a distrust of power, particularly concentrated power. The fourth is an insistence, in the face of all power, on equal civic respect for the individual and thus the importance of personal, political and property rights.
Unlike Marxists, liberals do not see progress in terms of some Utopian telos: their respect for individuals, with their inevitable conflicts, forbids it. But unlike conservatives, whose emphasis is on stability and tradition, they strive for progress, both in material terms and in terms of character and ethics. Thus liberals have typically been reformers, agitating for social change. Today liberalism needs to escape its identification with elites and the status quo and rekindle that reforming spirit.
Epic stale males
The specific liberal philosophy Wilson sought to promulgate was born amid the tumult of industrialisation and in the wake of the French and American revolutions. It drew from the intellectual inheritance of Enlightenment thinkers such as John Locke and Adam Smith. That tradition was further shaped by a series of Victorian intellectuals, most notable among them John Stuart Mill, which included this newspaper’s second editor, Walter Bagehot.
There were at the time liberal movements and thinkers throughout continental Europe as well as the Americas. The first politicians to claim the name, Spain’s liberales, did so in a short-lived era of parliamentary rule after 1812. The creed was embraced by many of the 19th century’s newly independent Latin American countries. But the movement’s centre was Britain, the world’s predominant economic and political power.
That liberalism was not today’s. Take foreign affairs. Victorian liberals were often pacifists who welcomed the ties of trade but eschewed military alliances. Later, a tradition of “liberal imperialism” justified colonialism on the basis that it brought progress—in the form of laws, property rights and so forth—to peoples that lacked them. Few make either argument today. The Economist was sceptical of imperialism, arguing in 1862 that colonies “would be just as valuable to us...if they were independent”. But “uncivilised races” were owed “guidance, guardianship and teaching”.
Liberalism was not born with the umbilical link to political democracy that it now enjoys. Liberals were white men who considered themselves superior to the run of humanity in both those particulars; though Bagehot, like Mill, supported votes for women, for most of its early years this newspaper did not. And both Mill and Bagehot feared that extending the franchise to all men regardless of property would lead to “the tyranny of the majority”.
Or consider the relationship between the state and the market. Liberals like Wilson had a near-religious faith in free enterprise and saw scant role for the state. Early Economist editorials inveigh against paying for state education through general taxation and greater public spending on relief efforts during the Irish famine. But in the early 20th century many European liberals, and their progressive cousins in America, changed tack, seeing progressive taxation and basic social-welfare systems as necessary interventions to limit the market’s failures.
This led to schism. Liberal followers of John Maynard Keynes embraced a state role in boosting demand to fight recession and providing social insurance. As this newspaper noted on its centenary in 1943, “The greatest difference...between the 20th century liberal and his forefathers is the place that he finds for the organising powers of the state.” Followers of Friedrich Hayek thought those organising powers always overreached in dangerous ways; hence the emergence of a “neoliberalism” interested in radically curtailing the state.
The Economist has, at times, embraced elements of both, driven by pragmatism and a sense of the present’s shortcomings as much or more than by ideology. When we supported graduated income taxes in the early 20th century, a position Wilson would have scorned, it was in part because those taxes, a Liberal policy, were more to our liking than the protectionist tariffs the Conservatives were touting. After the Depression and the second world war we hewed to Keynesian views that both allowed for significant state involvement in the economy and saw value in liberal nations working together to create a world in which their values could thrive. When we rebelled against the subsequent state overreach to champion the deregulation and privatisation that Margaret Thatcher and Ronald Reagan would later bring in, we were moved as much by the failures of the status quo as by libertarian zeal.
The Economist of recent years has been a supporter of stable prices and fiscal responsibility at home, of open trade and investment internationally, and of the market-friendly cocktail of policy prescriptions dubbed the “Washington consensus”. Amid today’s distrust of liberalism—and liberal self-doubt—it is worth remembering just how fruitful those positions have been. The core liberal causes of individual freedom, free trade and free markets have been the most powerful engine for creating prosperity in all history. Liberalism’s respect for diverse opinions and ways of life has whittled away much prejudice: against religious and ethnic minorities, against the proposition that girls and boys should have an equal opportunity to attend school, against same-sex sex, against single parents. The post-war liberal world order has contained conflict better than any previous system of alliances. Liberalism’s principles, pragmatism and adaptability have generated policies that solve practical problems while advancing its core tenets.
Many liberals have become conservative
There is, in short, much to be proud of. But the liberal ascendancy that came with the end of the cold war has been troubled. The misguided invasion of Iraq (which this newspaper supported at the time), and other failed interventions in the Middle East have exposed the hubris and difficulty of military action in the pursuit of universal values. The global financial crisis laid bare the dangers of under-regulated finance. Liberal economists paid too little attention to the people and places harmed by trade and automation. The liberal world order failed to confront the epic challenge of climate change or to adapt its institutions to the growing importance of emerging economies. Liberal thinkers paid too little heed to those things people value beyond self-determination and economic betterment, such as their religious and ethnic identities.
These failures mean that liberalism needs another reinvention. Those in favour of open markets and societies need to see off the threat posed by those who value neither. They also need to do a lot more to honour their promise of progress for all. That means being willing to apply their principles afresh to the existing and emerging problems of the ever-changing, ever-conflicted world.
It is a tall order. And it is made taller by the fact that this has, indeed, been a period of liberal ascendancy. Liberals like Wilson saw themselves, by and large, in opposition to entrenched elites. Today that is hard for liberals to do with a straight face. They have been the shapers of the globalised world. If it is a smallish number of the rich, and a large number of the very poor, who have done best out of that ascendancy, rather than liberals per se, liberals have still done pretty well; it is not too wide of the mark to caricature their views on migration as more influenced by the ease of employing a cleaner than by a fear of losing out. The wars, financial crisis, techified economy, migrant flows and chronic insecurity that have unsettled so many all happened on their watch, and in part because of policies they promoted. This undermines their credibility as agents of change.
Worse, it can also, shamefully, undermine their willingness to be such agents. Many liberals have, in truth, become conservative, fearful of advocating bold reform lest it upset a system from which they do better than most.
They must overcome that fear—or, if they cannot, they must be attacked by true liberals who have managed to do so. As Milton Friedman once put it, “The 19th-century liberal was a radical, both in the etymological sense of going to the root of the matter, and in the political sense of favouring major changes in social institutions. So too must be his modern heir.” On the occasion of our 175th birthday, we offer some ideas to meet Friedman’s challenge.
II Free markets and more
“JESUS CHRIST is free trade and free trade is Jesus Christ.” Even by the standards of the 1840s, Sir John Bowring, a British politician, made bold claims for the rock on which The Economist was founded. But his zeal was of the times.
The case for getting rid of British tariffs on imported grain was not a dry argument about economic efficiency. It was a mass movement, one in which well-to-do liberal thinkers and progressive businessmen fought alongside the poor against the landowners who, by supporting tariffs on imports, kept up the price of grain. As Ebenezer Elliott, a radical and factory owner, put it in one of the poems that led him to be known as the “Corn Law rhymer”:
Give, give, they cry–and take! For wilful men are they Who tax’d our cake, and took our cake, To throw our cake away.
When liberals set up the Anti-Corn Law League to organise protests, petitions and public lectures they did so in the spirit of the Anti-Slavery League, and in the same noble name: freedom. The barriers the league sought to remove did not merely keep people from their cake—bad though such barriers were, and strongly though they were resented. They were barriers that held them back, and which set people against each other. Tearing them down would not just increase the wealth of all. It would bring to an end, James Wilson believed, the “jealousies, animosities and heartburnings between individuals and classes...and...between this country and all others.”
The age of global trade ushered in by the free trade that followed the repeal created a remarkable amount of wealth. Given that it ended in the first world war, though, its record on reducing animosity was, at best, mixed. The next great age of global trade, which began after the second world war and grew into fullness with the end of the cold war, did even better, bringing with it the greatest reduction in poverty ever. Unfortunately there is still significant cause for jealousy, animosity and heartburning among those who live in places that lost out—enough of it that, amplified by unscrupulous leaders with protectionist politics, it is putting the remarkable gains of past decades at risk.
The modern era of multilateral trade negotiation was ushered in by the General Agreement on Tariffs and Trade (GATT) in 1947. It was based on the insight that unilateral tariff reductions, such as the repeal of the Corn Laws, are unstable. The concentrated displeasure of producers exposed to foreign competition is more powerful than the diffuse gratitude of the mass of consumers, and so tariffs get reimposed. If reductions are taken in concert with foreign powers, some producers gain new foreign markets, thus becoming supporters, and the international nature of the obligations makes backsliding harder.
In 1995 the GATT became the WTO, and almost every country on Earth now belongs to it. Tariffs are cut by negotiation and agreed rates applied to all trade partners; a dispute-settlement system authorises retaliation against miscreants. There are still high levies on some goods, and many emerging economies, such as Egypt’s or India’s, would benefit a lot if tariffs were cut further. But tariffs on goods are in general no longer a big barrier to global commerce. The best estimate is that getting rid of those which remain would add only about 1% to global GDP.
Freeing trade in services, such as those of lawyers, architects or airlines, would yield gains six times larger, maybe more. But the WTO, for which nothing is settled until everything is settled, has spent decades failing to reach big deals on services. Nor has it succeeded in stopping China, which joined in 2001, from flouting the spirit, if not always the letter, of its rules by shaking down foreign investors for technologies it fancies and giving under-the-table assistance to its own industries.
The trade system would benefit hugely from a grand agreement forged between America, China and Europe that put multilateral trade on terms appropriate for the 21st-century economy, and for a world in which the biggest trader is not a free market. Terms attractive enough that the rest of the world could be brought into them would both require and allow substantial reform of the WTO. Multilateral agreements in which groups of like-minded countries forge ahead should lead the way. Working towards such a goal should be at the forefront of trade policy.
Alas, the more urgent necessity is to ensure the survival of the current system which, having been undermined by China, is now under determined attack by America, once its greatest support. Fighting to forestall losses is not as inspiring as fighting for new progress. But it is yet more vital; backsliding is a threat to the livelihoods of hundreds of millions of people.
By George he had it
Defending the existing trade system is thus a paramount goal. And the gains it may yet offer, in services and elsewhere, are substantial. But no one could claim that free trade has the capacity to stir the spirit today in the way that the fight against the Corn Laws did, nor that it offers as much scope for progress in an already globalised world as in the mercantilist 19th century. Modern liberals must look for new reforms where dismantling barriers and increasing freedom will once again produce transformative gains for individuals and society.
They are spoilt for choice: there is much to do, from rewriting campaign-finance laws that give lobbyists disproportionate power in politics to removing the implicit subsidies still enjoyed in parts of the financial system. In both those cases, and many more, concentrations of power allow the rigged markets and rent-seeking that liberals abhor. But the cause of free trade was powerful in its simplicity, and in that respect two new targets stand out.
One is the market in urban land; the other, the anti-competitive economics of the modern economy, and particularly of the digital-technology businesses that increasingly dominate it. In both cases monopoly power distorts markets in ways that are economically significant, politically potent and ethically unjustifiable.
Start with land. Most 21st-century productivity growth and wealth creation will take place in highly productive cities. The world’s 50 largest conurbations house 7% of the population but account for 40% of gross product. The productivity gap between such cities and poorer places has widened by 60%, on average, in the past two decades, according to the OECD, and is still growing. Property prices in leading cities have soared. In Paris, Hong Kong, New York and London the median household spends on average 41% of its income on rent, as opposed to 28% 30 years ago.
This is a huge windfall gain for a relatively small number of property owners. It reduces the chances of prosperity for a much larger number who are prevented from moving to high-productivity cities offering better wages, and in doing so holds back the economy. One study suggests America’s GDP would be 9% higher if the less restrictive zoning laws of the median American city were to be applied to the priciest, fanciest ones.
The best solution to this is not new: it was well known, and pursued by liberals, in the 19th century. Tax landowners according to the underlying market value of the land that they own. Such a tax would capture for society part of the windfall that accrues to a landowner when his local area thrives. Land taxes capable of replacing all existing property taxes (which are raised on the value of what sits on the land, rather than just the land itself) and then some would greatly sharpen the incentive to develop. Because the amount of land is fixed, a land tax, unlike most other taxes, does not distort supply. At the same time, ease planning restrictions. It is no good raising the incentive to develop if regulation then stands in the way. But development rights have been so far collectivised in many cities as to come close to undermining the very notion of property. The curtailment of development rights enriches even owners of vacant plots; if the windfall gains from soaring property values are heavily taxed, NIMBYism will not be such a profitable strategy. The problem is getting those owners to give up the windfall and submit to a land tax in the first place.
The concentration of corporate power is a trickier problem. Returns to scale and strong network effects—the more users you have, the more you have to offer the next user—have encouraged concentration in various industries built around digital technology, and this encouragement has gone largely unchecked. One or two giant firms dominate each segment: Google in search, Facebook in social on one side of the Great Firewall, Alibaba and Tencent on the other. In addition, by collecting ever more data on ever more users’ habits, and armed with ever better algorithms, the incumbents can tweak their products to make them yet more attractive in various ways.
This risks reinforcing, perhaps supercharging, a wider trend for industries to be dominated by a few companies. In 2016 research by this newspaper showed that two-thirds of America’s 900 industrial sectors had become more concentrated from 1997 to 2012. In 2018, in a similar analysis for Britain, we found the same trend. It may help explain both higher profits and the squeeze on labour that has seen the wages of the less-skilled lowered.
If there is an economic problem in need of radical new intellectual approaches, this is it. The existing antitrust framework, created in the progressive era and refined in the 1980s, cannot deal with the nature of market concentration in the 21st century. The pace of mergers has risen. Large asset managers hold sizeable stakes in today’s big incumbent firms, and may encourage them to hoard profits and adopt safety-first strategies. Tech-platform firms enjoy network effects and are continually bundling more services together. The spread of artificial intelligence will give even more power to firms with access to lots of data.
Part of the answer is a tougher attitude to policing deals and to ensuring that new firms are not unfairly squashed. But when it comes to tech, something fresher and rooted in individual action and competitive markets would be best. One approach is to consider the data that users generate as a good they own or a service they provide for fees.
As with land taxes, there will be intense resistance to newly vigorous antitrust and competition law, or changes in the power structures building up around data, however popular they may be. Henry George’s call for a land tax, “Poverty or Progress”, sold more copies in America in the 1890s than any other book save the Bible. But the immense political power of landowners saw off the threat, there and elsewhere. David Lloyd George, a Liberal chancellor of the exchequer, put forward a land tax (with this newspaper’s support) in his 1909 “People’s Budget”. It did not pass.
Still, more affordable housing, more choice, lower prices and better jobs remain causes that people can get behind. And the ability of popular movements to grow as never before with the help of both social and mass media is one of the striking aspects of the modern age. This has allowed dissatisfaction with today’s liberal elite to mushroom; it might allow a liberalism of new reforms, new ideas and new alliances to do so, too.
This makes keeping the digital sector open and competitive all the more vital. Barriers to wealth-creation there are bad enough. Dominant companies which might limit, or skew, free expression, open deliberation and self-determination—encouraging “jealousies and animosities” in the realm of ideas—are worse.
III Immigration in open societies
THE bill in front of the House was a wretched thing, as the opposition politician explained. It would “appeal to insular prejudice against foreigners, to racial prejudice against Jews, and to Labour prejudice against competition”. But he could see why the majority party might like it. It would “no doubt supply a variety of rhetorical phrases for the approaching election.”
Substitute the word “Mexicans” for “Jews”, and this might have been a Democrat on the floor of the House of Representatives denouncing this year’s Securing America’s Future Act, a hardline Republican immigration bill. In fact they are the words of Winston Churchill, in 1904, speaking from the Liberal benches in opposition to the Aliens Bill that the Conservatives had brought before the House of Commons. The bill was the first attempt to legislate a limit to migration into Britain.
Immigration was as politically potent in the early 20th century as it is in the early 21st. Previous decades had seen a surge of people on the move across Europe. Millions had moved farther, heading across the Atlantic to America: hundreds of thousands of Chinese crossed the Pacific to the same destination. Xenophobic backlashes followed. Congress passed a law prohibiting Chinese migrants in 1882. By the time of the Immigration Act of 1924 it had, in effect, banned non-white immigration. It also curtailed the rights of non-whites already there in the same ways as it did the rights of its black population, with laws against miscegenation and the like. The flow of migrants across Europe produced a similar reaction. In “The Crisis of Liberalism” (1902) Célestin Bouglé, a French sociologist, marvelled at how a modern society could spawn bigotry and nativism. When Churchill mocked the idea of a “swarming invasion” in 1904, Britain was the only European country without immigration curbs; the following year it brought in its first.
Today some 13% of Americans are foreign-born; that proportion is approximately what it was in 1900, but much higher than it was in the intervening years. In 1965 it was just 5%: older Americans grew up in a pretty homogeneous society that was hardly a nation of immigrants. In many European countries the foreign-born share of the population has surged. In Sweden it is 19%, twice what it was a generation ago; in Germany, 11%; in Italy, 8.5%.
Open borders are rarely if ever politically feasible
The reactions have not been as harsh as they were a century ago. Indeed, in America the appetite for more immigration has grown even as the immigrants have arrived. In 1965 only 7% thought the country needed more immigrants; 28% do today. But any liberals feeling complacent are clearly not paying attention. Anger over immigration has fuelled the rise of illiberal regimes in central Europe; it is the main reason why right-wing populist parties are now in power in six of the European Union’s 28 countries; it explains much of the popularity of Brexit, and of Donald Trump. Concerns are growing in emerging economies, too—from Latin America, where the exodus of Venezuelans is roiling the region’s politics, to Bangladesh, which is struggling with the arrival of 750,000 Rohingya fleeing genocide in Myanmar.
There are four reasons to expect the issue to get yet more divisive. First, migrant flows are likely to rise. People in the global south are still poor compared with those in the north; modern communications make them very aware of this; modern transport networks mean that, poor as they are, many can afford to try to live the life they see from afar. According to Gallup, 14% of the world’s adults would like to migrate permanently to another country, and most of those would-be migrants would like to go to western Europe or the United States. Over the coming decades the consequences of climate change are likely to force large numbers of people, particularly in sub-Saharan Africa and south Asia, to move, and though most will probably not move all that far, some will try to go all the way. Some will be welcome; ageing populations in developed countries will need more working-age people to look after them and pay tax. It is very unlikely that all will.
Second, the world lacks good systems for managing migration. The 1951 UN Convention on Refugees set up a liberal and eventually near-universal regime for people fleeing oppression and other state malfeasance. It is ambitious and (theoretically) generous. There are no other mechanisms that give people general rights to seek their fortunes abroad. The result is that refugees’ treatment frequently falls far short of the legal rights to which they are entitled. Meanwhile low-skilled people without family members in rich countries with whom they might seek to be reunited have no way in. So some seek refugee status on dubious grounds.
The wrong kind of liberalism
Third, the modern welfare state complicates the issues around migration in a way that it did not a century ago. Illegal immigrants are not entitled to such benefits. But refugees often qualify, as do the children of people who have arrived illegally. The absolute level of spending may be small; the perception of inequity, though, can be beyond all proportion to the cost. People resent paying taxes to fund benefits that they perceive as going to outsiders.
Fourth, liberal attitudes to immigration have changed. Liberalism came of age in a Europe of nation states steeped in barely questioned racism. Nineteenth-century liberals were quite capable of believing that nations had no duties towards people beyond their borders. The Economist, although it did not support the Aliens Bill in 1904, made clear that it did “not want to see the already overgrown population swollen by ‘undesirable aliens’”.
Much modern liberalism has a more universalist view, along the lines of that enshrined in the Universal Declaration of Human Rights. To some, this means that no controls on immigration are justified: that a person born in Mali has the same right to choose where to live as one born in Germany. Totally open borders are rarely if ever politically feasible. But increased migration tends to be seen as good in itself by today’s liberals. It removes barriers that keep people from the lives they want, it produces more diverse societies and it offers economic betterment to all. People who move to places where they can be more productive realise almost instant gains; higher shares of immigrants are correlated with higher rates of entrepreneurship and dynamism. Economists estimate that, were the world able to accommodate the wishes of all those who wanted to migrate, global GDP would double.
A positive attitude to immigration pits liberals against many of their fellow citizens—for all liberals, despite what anyone may say, are citizens of somewhere—more than any of their other beliefs do. The conflict is made worse by the fact that today’s left, including many identified in America as liberals, has moved sharply towards an emphasis on group identity, whether based on race, gender or sexual preference, over civic identity. This leaves them leery of imposing cultural norms, let alone a sense of patriotism.
The 19th-century assumption that immigrants would assimilate and learn their new country’s language seems, to such sensibilities, oppressive. Several American universities have declared the phrase “America is a melting pot” to be a “microaggression” (a term in pervasive use and taken by the majority to be innocuous but which communicates a hostile message to minorities). It is hard, given such views, for left-liberals to articulate a position on immigration much more sophisticated than opposition to whatever restrictions on it currently seem most egregious. The more opposition you show, the better your credentials.
Trust, but E-verify
This is not a way to win. Liberals need to temper the most ambitious demands for immigration while finding ways to increase popular support for more moderate flows. They have to recognise that others place greater weight on ethnic and cultural homogeneity than they do, and that this source of conflict cannot be wished away. They must also find ways for the arrival of new migrants to offer tangible benefits to the people worried about their advent.
People often dislike immigration because it exacerbates a sense that they have lost control over their lives—a sense that has grown stronger as globalisation has failed to spread its prosperity as fully as it should have. Removing other barriers that get in the way of self-determination for people already living in their countries is thus both a good in itself and a way to lessen antipathy to migration. But restoring a sense of control also means migration has to be governed by clear laws that are enforced fairly but firmly.
Wary though liberals rightly are of state snooping, technology can help with this in various ways. Fully 75% of Americans support E-verify, a system that allows employers to check a worker’s immigration status online. If the system is administered in a just, efficient way and with proper procedures for appeal, liberals should feel happy to join them.
One aspect of setting clear rules is reforming the international system for refugees. In “Refuge” (2017) Alexander Betts and Paul Collier, two British academics, argue for a complete overhaul. This would include a broader definition of refugee status while encouraging people who claim that status to stay closer to their former homes. For this to work the refugees need to be integrated into local labour markets; investment needed to further that end should come from richer countries. At the same time, new avenues need to be found to give people who do not qualify as refugees some real hope of a legitimate route to wherever they want to go.
Then there is the question of distributing the benefits. Today most of the financial gains from migration accrue to the migrants themselves. Lant Pritchett of Harvard University reckons the annual income of the average low-skilled migrant to the United States increases by between $15,000 and $20,000. How could some of those gains be shared with the hosts? The late Gary Becker, an economist from the University of Chicago, argued for auctioning migrant visas, with the proceeds going to the host state. In their book “Radical Markets” Eric Posner and Glen Weyl argue that individual citizens should be able to sponsor a migrant, taking a cut of their earnings in exchange for responsibility for their actions. There is a bevy of less extreme reform ideas, such as “inclusion funds” paid for by a modest tax on the migrants themselves, which would spend their money in the places where migrants make up a disproportionate share of the population.
As well as taking a little more from immigrants, there will be circumstances when the state should give them a little less. Systems that offer migrants no path to citizenship, such as those of the Gulf states, are hard for liberals to stomach, and that is as it should be. But that does not mean all distinctions between migrants and established citizens should cease the moment they leave the airport. In America entitlement to retirement benefits kicks in only after ten years of contributions; in France, we hear, no one gets free baguettes until they can quote Racine. This is all entirely reasonable, and not illiberal. All who have arrived legally, or have had no choice in the matter, should have access to education and health care. Other benefits may for a time be diluted or deferred.
Liberal idealists may object to some or all of this. But if history is a guide, the backlashes that often follow periods of fast migration hurt would-be migrants, the migrants who have already arrived and liberal ideals more generally. Liberals must not make the perfect into the enemy of the good. In the long run, pluralist societies will accept more pluralism. In the short run, liberals risk undermining the cause of free movement if they push beyond the bounds of pragmatism.
IV The new social contract
OTTO VON BISMARCK—no one’s idea of a liberal—started Germany down the road to a welfare state in the 19th century. Trade unionists across the world fought for them in the 20th. Benito Mussolini built a fascist one. And James Wilson would have hated the idea. But from Lloyd George’s People’s Budget of 1909 to FDR’s New Deal in the 1930s to Ludwig Erhard’s soziale Marktwirtschaft in post-war West Germany, there was a distinctive liberal cast to the creation of modern welfare states. William Beveridge, the architect of the post-war British welfare state, was a liberal and Liberal politician. (He was also a trustee of The Economist.)
Some liberals, as well as most conservatives, grudgingly accepted these reforms as the lesser of two evils. By sharing the benefits of free enterprise more evenly welfare states could stave off the more radical, and damaging, redistributive promises of fascism and, for rather longer, socialism. But their creation was more than just a way to maintain the conditions in which liberalism could flourish. At their best and most liberal, welfare states cushion people from the rougher edges of capitalism while still putting a distinctive liberal stress on individual responsibility. They enhance freedom, enable free enterprise and bring about a broader embrace of progress. Or at least that is what their liberal creators believed—and what today’s liberals need to make sure of.
Giving governments responsibility for the education of the young, pensions for the old, financial support for the indigent, disabled and jobless, and health care for at least some, and occasionally all, required massive reforms, the details and ambition of which varied in different places. Since their creation, though, welfare states have changed rather little. Some countries have added benefits. America, even before Obamacare, was incrementally expanding the government’s role in health. Others, especially in Europe, have trimmed them: less generous assistance for the unemployed, extra conditions for welfare. But Beveridge would recognise today’s NHS, and FDR would recognise America’s unemployment insurance.
This is not because everyone is satisfied with the status quo. Conservatives contend that it dulls the edge of capitalism and the urge for self-betterment. Those on the left see it as a flimsy and patchy safety-net that needs expanding. Indeed, those countervailing stances go a long way towards explaining why social protection has changed remarkably little since the 1970s. The problem is that while welfare states have stood still, societies have not. And interventions originally intended to help people help themselves have not always done so.
Welfare systems and tax regimes have lagged behind a changing world
Far more women take paid work now than in the middle of the 20th century. Far more households are headed by a single parent. Jobs are much less likely to last for life, to start at nine or to end at five. People are more likely to have more than one at a time. Some of them like this, especially when one is a passion that the other subsidises. Others resent working at unpredictable hours for little money at the beck and call of more than one master. An OECD study suggests only 60% of the rich world’s workforce has stable employment. Most important, in terms of expense, health care is getting costlier and people are living much longer.
The system has tried to cope, especially with the bits that most drain the public purse. But the coping has been neither sufficient (increases in retirement age have not kept up with increases in life expectancy) nor popular (people, especially people likely to rely on state pensions, do not like having the retirement age raised). As for helping people to adapt to changes in the world of work, much too little has been done. The greatly increased need for parental leave and for some forms of child care has been scarcely addressed. Workers desperate for new skills see public investment in education overwhelmingly directed at the not-yet-employed. Meanwhile the interaction of tax policy and welfare system often makes jobs unreasonably unattractive. Nearly 40% of the jobless in the OECD see a marginal tax rate of more than 80% when they start work.
The failure of welfare systems to cushion the huge changes brought about largely by liberal policies—on destigmatising single parenthood as much as on trade—is one of the reasons people are a lot less likely than they once were to trust liberals offering to fix things. But things must be fixed. According to the OECD, the ratio of working-age to retired people across rich countries is set to fall from 4:1 in 2015 to 2:1 in 2050. Add on higher health-care costs and spending on the old will soar as the number of workers to sustain that spending plunges. If the failure to raise the retirement age significantly is expensive today, it will be ruinous tomorrow. And if workers are not made more productive, even the less-than-ruinous expenses will be hard to pay.
UBI enchaîné
The erosive effects of robotisation and artificial intelligence on the world of work are debatable and frequently exaggerated. But though optimists think clever and more dexterous machines will make most of their human colleagues more productive, rather than redundant, they hardly see a return to the 20th-century world of copious lifelong jobs. The coming decades will further strain people’s ability to predict what skills they will need and how their careers will evolve.
This means that a liberal rethink of the welfare state starts with education. Thanks to earlier liberal reformers, who sought universal schooling in the 19th century and welcomed greatly expanded universities in the 20th, today’s states make their educational investments mostly in people from five or six to 20 or 21. This no longer makes much sense. Pre-school interventions, including many not specifically aimed at the classroom, do a lot more for the life chances of poor children than spending on universities does. And people can need training and further education a long time after their years of university and apprenticeship. There is a case for a big change in priorities here.
New approaches should lay less stress on existing institutions and more on helping people take down the barriers that stand in their way. The periodic “lifetime learning” credit that Singapore gives to all adults to pay for training is one way forward, but things need to go further, perhaps with lifetime vocational education taking the place of a year or so’s support at university.
Then there is the challenge of curbing the continuous rise in pension payments by focusing their benefits on the people who need them most. Better educated, more skilled people are working and living longer; the less affluent and skilled stop work earlier and tend to live less long. (In America they are seeing their life expectancy fall.) Pension policy should reflect this. It makes no sense for rich workers to begin drawing a state pension in their 60s. They do not need the support and their long lives mean that the state will end up paying out for years. There are people with better claims on that money.
The greatest potential for reform, however, lies in consolidating and reducing the distortions in the mass of other social-protection schemes—unemployment insurance, food stamps, welfare and so forth. In the past few years the idea of a “universal basic income” (UBI) that would be paid to all, with no strings attached, has generated a lot of debate, and significant support, both on the left and the right.
Right-wing UBI supporters like it because an unconditional payment does not affect people’s incentives to work; an extra job, or an extra hour at work, does not reduce benefits. They also see it as removing various distortions in today’s welfare states, slashing bureaucracy and government snooping. Supporters on the left are keen because they see UBIs as redistributive, egalitarian, welfare enhancing and liberating. Enthusiasm for UBIs has spawned pressure groups, public campaigns and randomised trials.
Many of the idea’s attributes appeal to liberals too. A UBI would reduce the state’s interference in people’s lives. But from the liberal point of view such gains must be set against two big disadvantages, one a matter of principle, one of practicality. The principle is that the 20th-century social contract from which the welfare state was born was that the state would help people help themselves, rather than just give them stuff: it should provide a safety-net, not a platform scattered with silk divans. Liberals tend to believe that people will be happiest if they can achieve self-reliance. And, in practical terms, UBIs would mean either eye-popping increases in tax or cuts in support for the genuinely needy, particularly in countries where welfare spending is already relatively targeted on the poor. In America a UBI of $10,000 a year would require a tax take of at least 33% of GDP—less than the level in many countries, but some $1.5trn more than the current 26%.
A more modest, but still radical, alternative is to replace today’s welfare schemes with an expanded commitment to guaranteeing minimum income through negative income taxes. First championed by Milton Friedman, such taxes mean that the state tops up the income of anyone earning less than a guaranteed minimum. Both Britain and America have tax credits to top up wages along these lines.
Because they avoid transfers to the rich, such schemes are inherently cheaper than UBIs. A great deal could be achieved by simultaneously overhauling payroll taxes (the form of tax that has the greatest impact on low-income earners) so that the path from receiving a top-up to paying taxes is much smoother, and perhaps by broadening the eligibility criteria for the negative tax. There are various forms of currently unpaid labour, most notably in caring, that some societies might wish to support in such a way.
This, though, is only the beginning of the reform needed. Like welfare systems, tax regimes have lagged behind a changing world. Indeed, reform has often gone the wrong way. Over the past 40-odd years taxes on capital have fallen, as have income taxes on high earners. That made sense, considering the heights which the top rates of those taxes reached. The benefits that accrue to society as a whole from investment and well-rewarded work required that taxes be reduced.
At the same time wealth taxes, particularly on property and inheritance, have been reduced or eliminated in many developed countries. As a result the share of tax revenue from property has stayed the same and that from capital has fallen, even as the value of property and the share of national incomes going to capital have soared. Outside America, value-added taxes have been imposed on consumption, producing a welcome increase in the tax system’s efficiency but also making it more regressive.
In the 21st-century economy these shifts should be reversed. Labour, particularly low-skilled labour, should be taxed less. Folding payroll and other employment taxes into the income-tax system would ease the squeeze for low-skilled workers. Shrinking the gap between taxes on capital and taxes on labour would counter the skew towards capital; and if capital investment were written off against corporation tax, this would not need to deter investment. Moderate inheritance taxes—a liberal invention, stemming in part from a healthy distrust of the concentration of wealth and power—should be maintained or reinstated, not least because they are fairly efficient. Loopholes used to avoid them should be tightened up. Property taxes should be reformed into land taxes. Taxes on carbon and other negative externalities, though not a universal panacea for the problems of climate change, would be a reform in the right direction, too.
This adds up to an agenda for reform much bigger than the tax-and-welfare tinkering seen over recent decades. In some ways these changes are likely to be politically harder than the reforms which built up the welfare state and the taxation systems which support it in the first place. It is easier to build from scratch than to attempt to change a huge and complex edifice on which millions rely, which millions resent, and which all have opinions on. And all this needs to happen in a world where the threat of socialism no longer scares conservatives into taking the liberal side.
But if liberal democracies are to continue to provide progress for their citizens they need a new form of welfare. And if they are to afford that welfare reform, they need a tax system that is both more efficient and better fitted to encouraging what society wants more of and discouraging what does it harm.
Similar arguments apply to the other great innovation of the post-second-world-war world: the international liberal order. It is necessary to preserve it; it is perhaps harder to preserve than to build; and there is no longer a socialist, or indeed communist, bogeyman that can serve to unite liberals with all others committed to private property and economic well-being. Indeed, there is what some might see as a state-led post-communist siren instead. It is to that challenge that we now turn.
V A liberal world order to fight for
WERE a single document to mark the high-point of liberal-world-order hubris, it would surely be “The End of History?”, an essay written by Francis Fukuyama, an American academic, in 1989. Mr Fukuyama’s question, posed a couple of months before the fall of the Berlin Wall, was whether the world was seeing the “universalisation of Western liberal democracy as the final form of human government”. His answer was yes.
How extraordinary that seems in 2018. China, the world’s most successful economy over the past 30 years and likely to be its largest over the coming 30, is growing less liberal, not more, and its state-led, quasi-capitalist illiberalism is attracting admirers across the emerging world. In the Muslim world, and elsewhere, ties of sect and community, often reinforced by war and the fear of war, bind far tighter than those of liberal aspiration. On a measure of democracy made by the Economist Intelligence Unit, our sister organisation, more than half of the 167 countries surveyed in 2017 were slipping backwards. The backsliders include America, where the president seems to prefer dictators to democrats.
That is particularly worrying. America did more than any other nation to create and sustain the order Mr Fukuyama celebrated. In the 1940s it underwrote the Marshall plan and championed the creation of the IMF, the World Bank, the GATT and NATO. It cheered on the first moves towards European unity. Its armed forces contained liberalism’s greatest enemy, the Soviet Union. Its dollar underpinned the global economy. And because America was founded on liberal values, this Pax Americana espoused liberal values, even if it did not always live up to them.
Mr Fukuyama thought the end of the cold war would let the liberal internationalist project move beyond its reliance on American power. The prosperous examples of America, Europe, East Asia’s tiger economies and a Latin America abandoning military rule, along with a lack of alternatives, would bring the rest of the world on board. So it did, to some extent, for a while. But it was far from universal. And America has become an unhappy Atlas.
President Donald Trump’s rejection of the values underlying NATO and the WTO has been remarkable, his spurning of America’s role in maintaining them even more so. Yet his approach is not without precedent, or support. In 2002, the outrages of September 11th 2001 still fresh in their minds and hearts, only 30% of Americans agreed that “America should deal with its own problems and let other countries deal with theirs”. But long, painful wars in Afghanistan and Iraq have reinforced American scepticism about interventions abroad that cannot be pulled off quickly and do not seem vital to the national interest. By 2016, the idea of America dealing with its own problems and leaving the rest of the world to deal with theirs appealed to 57%. Younger people are astonishingly insouciant about revanchist Russia and ascendant China. Only one in two millennials think it is important for America to maintain its military superiority.
Liberal ideals are worthless unless backed by military power
It is possible that the next president could swing in the opposite direction, recognising the vital role its alliances play in American security, seeking to reform rather than vilify international institutions like the WTO and reinvigorating international co-operation on climate change—a grave threat to the world order which has been far less doughtily faced than that of communism. But it is unlikely. So is any notion of Europe and other democracies taking on the challenge. And even if either were to come about, China would still represent a daunting challenge. Xi Jinping’s determination to centralise power and to hold on to it indefinitely is a large part of that. But Mr Xi may represent a deeper shift: one made possible by the addition of digital technology to the apparatus of centralised authoritarianism.
Liberals have long believed that state control eventually collapses under its inefficiencies and the damage that the abuse of power does to systems that lend themselves to it. But the enthusiasm with which China has embraced digital living has given the Communist Party new tools for political control and responsive tyranny. Cyber-China may not have solved for all time the challenge of identifying and quashing opposition without stirring up more of it. But its efforts in that direction could last longer than hitherto imagined. It would be a foolish mistake to base an international order on the assumption that China will become more liberal any time soon.
Liberals also used to believe that autocracies might be capable of one-off bursts of innovation, like Sputnik, but could not produce technical progress reliably, year in year out. Yet in the past five years, Chinese tech firms have generated hundreds of billions of dollars of wealth. The protection afforded them by the Great Firewall and government policy is part of that success, but not all of it. China’s government is investing huge resources in tomorrow’s technologies while its new digital giants make full use of the vast amounts of data they have on Chinese needs, habits and desires.
Mr Xi sometimes stresses China’s commitment to peaceful, harmonious development. But he then speaks more ominously about “great-power diplomacy with Chinese characteristics”. On climate change, or indeed trade, China talks warmly of the rules-based global system. Yet it ignores international-court rulings against its militarised island-building in the South China Sea and blocks UN criticism of its abysmal record on human rights.
A reasonable forecast is that China will embrace international collaboration where it sees advantage in doing so and act unilaterally where its interests dictate. It will also devote some of its burgeoning technological capabilities to new ways of making war. If America continues on its current path it will do much the same. This will not make the two equivalent. Though China’s military capabilities will grow quickly, they will not match America’s. And it will always be easier and wiser for liberals to trust America to do the right thing in the end.
But if there is no clear international order, just big powers doing what they want, the world will get more of the same as Brazil, Indonesia, India, Nigeria and others increase in strength. Regional powers rubbing up against each other unconstrained; nuclear weapons; the destabilising effects of climate change: it might all work out for the best. But that is not the way to bet.
Getting a League of Nations right
Faced with this uncomfortable reality, 21st-century liberals must remember two lessons from the 20th. The failure of the League of Nations between the world wars showed that liberal ideals are worthless unless backed by the military power of determined nation states. The defeat of communism showed the strength of committed alliances.
Liberals should thus ensure that the states which protect their way of life are able to defend themselves decisively and, when necessary, to blunt the ambitions of others. America’s European and Asian allies should spend both more, and more wisely, on their arsenals and training their troops. Healthier existing alliances will ease the creation of new ones with countries that have reason to worry about China’s ambitions.
Military capabilities are crucial. Only with them firmly in hand can the most be made of the world’s many mechanisms for peace. In the cold war, the West and the Soviet Union had few economic links. The big economies of the 21st century are highly integrated. The gains to be reaped from working together to repair, reform and sustain the rules-based trade and economic system are huge.
In this spirit China’s ambitions to make the yuan an international currency should, in general, be welcomed—they will only serve to hasten its economic liberalisation. The new Asian infrastructure bank it supports is likely to prove a useful addition to international finance. Some of the “One Belt One Road” infrastructure with which it is forging links to the rest of Eurasia will be useful—though the West needs to keep an eye out for cryptic militarisation. A strong West can welcome China’s more forthright voice and increased influence, while limiting the threats that it poses.
The strength which serves that end cannot be purely military, or indeed purely economic. It must be a strength of values, too. At the moment, the West is in disarray on this front. Mr Trump has no values worth the name. European politicians are hard put to maintain liberal values at home, let alone stand up for them abroad. Nor do the leaders of India, South Africa, Brazil and the other big democracies of the developing world go out of their way to support abroad the values they espouse at home.
A decade ago the late John McCain proposed the idea of a “league of democracies”. Such a league’s members might champion liberal, democratic values and at the same time hold each other to account in such matters. It is an idea worth revisiting as a credible and useful alternative forum to the UN. The more clearly the people of liberal democracies can show that their countries work well, and work well together, the more secure they will feel, the more secure they will be and the more others will wish to join them. The world needs a vision of international relations which shores up, promulgates and defends liberal ideals. If liberal nations look only inward and give up either the power or the will to act, they will lose the moment, and perhaps their future.
VI A call to arms
OVER the past couple of years there has been a boom in gloomy books with titles such as “The Retreat of Western Liberalism” or “Has the West Lost It?”. Magazine articles routinely ask “Is Democracy Dying?” (Foreign Affairs and more recently the Atlantic) or “What’s killing liberalism?” (the Atlantic again). The cock-of-the-walk confidence with which liberals strode into the 21st century has given way to trembling self-doubt.
Good. A complacent liberal is a failing liberal. The crucial liberal reinventions at the turn of the 20th century, during the Depression, and in the stagnation and inflation of the 1970s were all accompanied by books in which liberals (and sometimes a few others) declared the creed to be in crisis, betrayed or dead. Such restless self-doubt spurred the adaptability that has proved liberalism’s greatest strength.
This essay has argued that liberalism needs an equally ambitious reinvention today. The social contract and geopolitical norms that underpin liberal democracies and the world order that sustains them were not built for this century. Geography and technology have produced new concentrations of economic power to tackle. The developed and the developing world alike need fresh ideas for the design of better welfare states and tax systems. The rights of people to move from one country to another need to be redefined. American apathy and China’s rise require a rethinking of the world order—not least because the huge gains that free trade has provided must be preserved.
The need for new thinking does not mean ignoring the lessons of history. The 21st century brings some challenges not seen before, most obviously and most worryingly climate change, but also the prospects of intrusive new technologies of the mind. But inequality of opportunity and the discontent it drives are not new. Nor is the unhealthy concentration of wealth and power. That is why it is worth dusting off 19th-century ideas, from vigorous competition policy to the taxation of land and inheritance.
Whether it was the Anti-Corn Law League, America’s Progressive movement, the architects of the Bretton Woods system or the free-marketeers who urged the taming of inflation and the rolling back of the state in the 1970s, liberal reformers at their best have shared a dissatisfaction with the status quo and a determination to attack established interests. That sense of urgency and boldness is missing now. Liberal reformers have become liberal insiders, satisfied beneficiaries of the world they have helped to build. Their setbacks provoke despondency and panic more than determination. They lack a motivator on a par with the fear (of socialism, fascism or communism) or the trauma of failure (the Depression, the world wars) that drove past reinventions. The threats of nationalism and authoritarianism, though grave and pressing, seem less acute. The success with which policymakers prevented the 2008 financial crisis from spiralling into a global depression added to the complacency and dulled the hunger for more radical reform—even though the mishandling of the crisis in Europe led to many of that continent’s current political problems.
Liberals need to shake themselves out of this torpor. And they need to persuade others of their ideas. All too often, in recent years, liberal reforms have been imposed by judges, by central banks and by unaccountable supranational organisations. Perhaps the best-founded part of today’s reaction against liberalism is the outrage people feel when its nostrums are imposed on them with condescending promises that they will be the better for it.
Liberals also need to look at the degree to which self-interest blunts their reforming zeal. The people who produce and promulgate liberal policy are pretty well enmeshed with the increasingly concentrated corporate elite. Its well-heeled baby-boomer bloc is happy to get pensions that economic logic says it should forgo. If there is a greater liberal stronghold than the international institutions which liberals need to reform, it is the universities that they need to reappraise, given the urgent need to support lifetime learning. Liberals have gained the most when they have taken on entrenched power. Now that means attacking both their current allies and their own prerogatives.
How do you kick-start a liberal reinvention? It may be necessary to up-end traditional party structures, much as Emmanuel Macron has already done in France. It may demand a new generation of politicians who cannot be blamed for the way things are and articulate better than today’s crop how things should be. But whoever leads, they and their followers need to be willing to test their ideas against others’ as forthrightly as possible.
That means free speech—a lot of it. And speech that is well informed and in good faith, too. But as autocrats gain clout, the room for free speech is shrinking. Only 13% of the world’s people live in a country with a truly free press, according to Freedom House. In America, Donald Trump’s pathological lying and constant attacks on the media as “enemies of the people” and “fake news” are taking their toll. But the fact-free world of paranoid fantasy that right-wing media provide for his followers is a bigger problem.
So is the echo chamber afforded by social media—even when they are not being manipulated by foreign powers. By reinforcing people’s biases, they cut off the competition ideas need if they are to improve. At the same time they discredit the compromise that democracy needs. They relentlessly encourage a focus on the identity politics that increasingly consume left-liberals, particularly in America, drawing attention away from the broad canvas of economic and political reform to the fine brush strokes of comparative victimology. Online as elsewhere, identity politics have obstructed robust debate and promoted soft censorship.
The Economist thus marks its 175th anniversary with wariness, with optimism and with purpose. Wariness because not enough people have grasped the scale and urgency of the reforms needed if the values and insights that underpin our founding creed are to flourish as they should. Optimism because those values are as relevant as ever.
Purpose because nothing serves liberalism better than “a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress”. James Wilson’s words are reprinted on the first page of his newspaper this week and every week. We start our second 175 years with a renewed determination to live up to them.
Liberalism: further reading
This essay benefited from the insights and assistance of a great many people. In particular, Alexander Zevin of City University of New York, author of a forthcoming independent history of this newspaper ("The World According to The Economist", to be published by Verso Books), was an outstanding guide to our history. The essay has drawn on the following books and articles: Books “Reordering the World: Essays on Liberalism and Empire”, by Duncan Bell. Princeton University Press, 2016 “Refuge: Transforming a Broken Refugee System”, by Alexander Betts and Paul Collier. Penguin Books, 2017 “Exodus: How Migration is Changing Our World”, by Paul Collier. Oxford University Press, 2013 “The Future of Capitalism: Facing the New Anxieties”, by Paul Collier. Allen Lane, 2018 “Why Liberalism Failed”, by Patrick J. Deneen. Yale University Press, 2018 “The Pursuit of Reason: The Economist 1843-1993”, by Ruth Dudley Edwards. Hamish Hamilton, 1993 “Liberalism: The Life of an Idea”, by Edmund Fawcett, Princeton University Press, 2014 “The New Urban Crisis”, by Richard Florida. OneWorld, 2017 “Success and Luck: Good Fortune and the Myth of Meritocracy”, by Robert H. Frank. Princeton University Press, 2016 “Liberalism: A Very Short Introduction”, by Michael Freeden. Oxford University Press, 2015 “Capitalism and Freedom”, by Milton Friedman. University of Chicago Press, 1962 “The Road to Somewhere”, by David Goodhart. C. Hurst & Co, 2017 “The Limits of the Market”, by Paul de Grauwe, Oxford University Press, 2017 “The Politics of Immigration: Contradictions of the Liberal State”, by James Hampshire. Polity Press, 2013 “Free Trade and Liberal England, 1846-1946”, by Anthony Howe. Clarendon Press, 1997 “Free Trade Under Fire” (3rd edition), by Douglas Irwin. Princeton University Press, 2015 “The World America Made”, by Robert Kagan. Alfred A. Knopf, 2012 “The Jungle Grows Back”, by Robert Kagan. Pisces Books, 2018 “Who Owns the Future?”, by Jaron Lanier. Simon & Schuster, 2013 “AI Super-powers: China, Silicon Valley and the New World Order”, by Kai-Fu Lee. Houghton Mifflin Harcourt, 2018 “The Once and Future Liberal: After Identity Politics”, by Mark Lilla. Harper, 2017 “The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality”, by Brink Lindsey and Steven M. Teles. Oxford University Press, 2017 “The Breadstealers: The Fight against the Corn Laws”, by Norman Longmate. St Martin’s Press, 1984 “The Retreat of Western Liberalism”, by Edward Luce, Little Brown, 2017 “Has the West Lost It?”, by Kishore Mahbubani. Allen Lane, 2018 “Age of Anger: A History of the Present”, by Pankaj Mishra. Penguin Books, 2017 “The People vs Democracy”, by Yascha Mounk. Harvard University Press, 2018 “What is Populism?”, by Jan-Werner Müller. University of Pennsylvania Press, 2016 “Adam Smith: What He Thought and Why It Matters”, by Jesse Norman. Penguin Books, 2018 “Is the American Century Over?”, by Joseph S. Nye, Jr. Polity Press, 2015 “Enlightenment Now: The Case for Science, Reason, Humanism and Progress”, by Stephen Pinker. Allen Lane, 2018 “Radical Markets: Uprooting Capitalism and Democracy for a Just Society”, by Eric A. Posner and E. Glen Weyl. Princeton University Press, 2018 "Bread for All: the Origins of the Welfare State”, by Chris Renwick. Allen Lane, 2017 “Factfulness”, by Hans Rosling with Ola Rosling and Anna Rosling Ronnlund. Sceptre, 2018 “Rethinking the Economics of Land and Housing”, by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane. Zed Books, 2017 “Where We Are: The State of Britain Now”, by Roger Scruton. Bloomsbury Press, 2017 “Counter-revolution: Liberal Europe in Retreat”, by Jan Zielonka. Oxford University Press, 2018 Articles “The London Economist and the high tide of laissez faire”, by Scott Gordon, 1955. Journal of Political Economy, December 1995 "The closing of the liberal mind", by John Gray. New Statesman, November 2016 “The free-market welfare state”, by Samuel Hammond. Niskanen Centre, May 2018 “Liberal internationalism 3.0: America and the dilemmas of liberal world order”, by G. John Ikenberry. Perspectives on Politics, 2009 “The future of liberal world order”, by G. John Ikenberry. Japanese Journal of Political Science, September 2015 “The end of liberal international order?”, by G. John Ikenberry. International Affairs, January 2018 “Reluctant or liberal collectivists. The social liberalism of Keynes and Beveridge, 1922-1945”, by Tudor Jones. Journal of Liberal History 78, Spring 2013 "On labor mobility, economic growth and targeted programs", Lant Pritchett, Centre for Global Development, 2018 "Balanced migration: A progressive approach", by Harvey Redgrave. Tony Blair Institute for Global Change, March 2018 "Is unrestricted immigration compatible with inclusive welfare states? National institutions, citizenship norms and the politics of free movement in the European Union", by Martin Ruhs, University of Oxford "Measuring immigrant assimilation in the United States", by Jacob L. Vigdor. Manhattan Institute, 2008 "Freeing the captured economy", Discussion in Cato Unbound, January 2018
“The most important cause of their pessimism is bad policy and bad leadership,” said Minxin Pei, a professor at Claremont McKenna College [and contributor to the NED’s Journal of Democracy] who is in frequent contact with business figures. “It’s clear to the private businesspeople that the moment the government doesn’t need them, it’ll slaughter them like pigs. This is not a government that respects the law. It can change on a dime,” he told the Times.
There is mounting concern generally about China’s influence campaigns in countries like Canada, much of it executed through the United Front Work Department, a secretive offshoot of the Chinese Communist Party (CCP) known to work with ethnic Chinese organizations overseas, the Calgary Herald adds:
The group seems to have “all the hallmarks” of a front organization to further Beijing’s interests, says Jonathan Manthorpe, whose just-published book, Claws of the Panda, documents China’s influence campaigns.
Increasing Chinese leadership in the Middle East is served by a growing interest among the region’s states to pursue the “China Model” at the expense of the “Washington Consensus” that has traditionally defined foreign economic presence in the region, analyst Nicholas Lyall writes for the Diplomat:
