ASIA
09 June 2014
Threats to Western Civilization
The main threat to Western Civilization is not the rise of Asia nor the size of China. It is the deterioration in the quality of Western economic and political institutions.
The main threat to Western Civilization is not the rise of Asia nor the size of China. It is the deterioration in the quality of Western economic and political institutions.
The symptoms of this threat were laid out clearly in a recent speech on resilient economies for more inclusive societies by Angel Gurria, the secretary-general of the Organisation of Economic Cooperation and Development (OECD).
"After six years of crisis, the world needs our wisdom, our inspiration, our new ideas, now," said Gurria.
"The global economy is showing important signs of progress ... But it is not enough."
"It is still not enough to bring the 202 million unemployed back to a decent job. This is not enough, when we have 73 million youngsters out of work. This is not enough, when inequalities in many countries are now growing faster than before the crisis. And this is certainly not enough, when trust in leaders, governments, parliaments, corporations, banks, rating agencies, regulators and media, is eroding and reaching record lows."
"This crisis should be a game-changer. We cannot go back to business as usual, to the same active inertia where high net worth individuals and multinationals don’t contribute their fair share to society; where the vulnerabilities of financial systems are camouflaged; where speculation and leverage keep flying high; and where some policy-makers and economists are still clinging to economic models that have been proven obsolete, wrong or unsustainable.
"It is time to imagine a new type of growth that is focused on the wellbeing of people, on the benefits of equitable societies, on the trade-offs and complementarities of different policies in favour of human progress. I am talking about what we at the OECD call Inclusive Growth."
These are of course wonderful words. But what is intriguing is the OECD's adoption of "inclusive growth", a concept coming from development economists fighting poverty in poor countries. Yes, we are indeed regressing. But it is important because the inclusive growth agenda of providing opportunity to everyone is highly relevant to our once-rich countries.
Inclusive economic institutions were indeed the force behind the massive growth in prosperity in the West in the post-war period. They harnessed the potential of inclusive markets, encouraged technological innovation, invested in people, and mobilized the talents and skills of a large number of people and fostered economic growth and prosperity.
But over recent decades, we have seen a deterioration in these same economic institutions in Western society. These institutions are now becoming less and less inclusive, and more and more "extractive".
This means that they extract incomes and wealth from the mass of people, and direct them to the benefit of elites. Political power is becoming more and more concentrated in narrow elite groups. Nowhere is this more the case than in the US. But the trend is present in almost all Western countries.
Working class men and and women have seen their incomes stagnate or even decline, due to the effects of technology, and competition from global labor markets. Then there has been the effect of deindustrialization and the fading power of trade unions.
As governments struggle to manage budget deficits, access to public services like education and health is also squeezed, despite the promising advent of Obamacare. The most flagrant signs of something being wrong are the explosion of student debt in the US, and the decline in US education performance relative to some Asian and other countries.
Then we have tax cheating by rich people and multinational companies, and bailouts for banks, which cost our societies dearly and compromise the capacity of governments to serve all citizens. And the deterioration in the global environment threatens our very future.
But what has been most prominent has been the corporate capture of government, especially, but not only, in the US by economic elites and organised groups representing business interests. These groups have had substantial impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence at all.
This has led some to argue that the US is no longer a democracy, but an oligarchy. In other words, the US is suffering from the crony capitalism of which it accuses many countries in Asia.
In another more recent speech on the "reform agenda", Angel Gurria highlighted the importance of issues like trade in services, labor markets, skills development, climate change and inequality. This is a fine list. But the problem is that there are corporate interests (and some others) lined up blocking each and every one of these reforms.
In short, the honorable quest for inclusive growth is being dragged down by the narrow interests of extractive political elites. The effects are evident and growing -- chronically stagnant economies, growing poverty, increasing inequality, widespread precarious employment, disaffected youth, and so on.
Social tensions and unrest will likely continue to grow. Hopefully, extractive political elites will one day hear the bells ringing. Because ultimately the future of Western civilization is at stake.
Executive Director
Asian Century Institute
The symptoms of this threat were laid out clearly in a recent speech on resilient economies for more inclusive societies by Angel Gurria, the secretary-general of the Organisation of Economic Cooperation and Development (OECD).
"After six years of crisis, the world needs our wisdom, our inspiration, our new ideas, now," said Gurria.
"The global economy is showing important signs of progress ... But it is not enough."
"It is still not enough to bring the 202 million unemployed back to a decent job. This is not enough, when we have 73 million youngsters out of work. This is not enough, when inequalities in many countries are now growing faster than before the crisis. And this is certainly not enough, when trust in leaders, governments, parliaments, corporations, banks, rating agencies, regulators and media, is eroding and reaching record lows."
"This crisis should be a game-changer. We cannot go back to business as usual, to the same active inertia where high net worth individuals and multinationals don’t contribute their fair share to society; where the vulnerabilities of financial systems are camouflaged; where speculation and leverage keep flying high; and where some policy-makers and economists are still clinging to economic models that have been proven obsolete, wrong or unsustainable.
"It is time to imagine a new type of growth that is focused on the wellbeing of people, on the benefits of equitable societies, on the trade-offs and complementarities of different policies in favour of human progress. I am talking about what we at the OECD call Inclusive Growth."
These are of course wonderful words. But what is intriguing is the OECD's adoption of "inclusive growth", a concept coming from development economists fighting poverty in poor countries. Yes, we are indeed regressing. But it is important because the inclusive growth agenda of providing opportunity to everyone is highly relevant to our once-rich countries.
Inclusive economic institutions were indeed the force behind the massive growth in prosperity in the West in the post-war period. They harnessed the potential of inclusive markets, encouraged technological innovation, invested in people, and mobilized the talents and skills of a large number of people and fostered economic growth and prosperity.
But over recent decades, we have seen a deterioration in these same economic institutions in Western society. These institutions are now becoming less and less inclusive, and more and more "extractive".
This means that they extract incomes and wealth from the mass of people, and direct them to the benefit of elites. Political power is becoming more and more concentrated in narrow elite groups. Nowhere is this more the case than in the US. But the trend is present in almost all Western countries.
Working class men and and women have seen their incomes stagnate or even decline, due to the effects of technology, and competition from global labor markets. Then there has been the effect of deindustrialization and the fading power of trade unions.
As governments struggle to manage budget deficits, access to public services like education and health is also squeezed, despite the promising advent of Obamacare. The most flagrant signs of something being wrong are the explosion of student debt in the US, and the decline in US education performance relative to some Asian and other countries.
Then we have tax cheating by rich people and multinational companies, and bailouts for banks, which cost our societies dearly and compromise the capacity of governments to serve all citizens. And the deterioration in the global environment threatens our very future.
But what has been most prominent has been the corporate capture of government, especially, but not only, in the US by economic elites and organised groups representing business interests. These groups have had substantial impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence at all.
This has led some to argue that the US is no longer a democracy, but an oligarchy. In other words, the US is suffering from the crony capitalism of which it accuses many countries in Asia.
In another more recent speech on the "reform agenda", Angel Gurria highlighted the importance of issues like trade in services, labor markets, skills development, climate change and inequality. This is a fine list. But the problem is that there are corporate interests (and some others) lined up blocking each and every one of these reforms.
In short, the honorable quest for inclusive growth is being dragged down by the narrow interests of extractive political elites. The effects are evident and growing -- chronically stagnant economies, growing poverty, increasing inequality, widespread precarious employment, disaffected youth, and so on.
Social tensions and unrest will likely continue to grow. Hopefully, extractive political elites will one day hear the bells ringing. Because ultimately the future of Western civilization is at stake.
Author
John WestExecutive Director
Asian Century Institute
REFERENCES:
- Let’s Make Wisdom Matter! Resilient Economies for Inclusive Societies. Opening Remarks by Angel Gurría, OECD Secretary-General, delivered at the OECD Forum 2014. Paris, 5 May 2014.- Why Nations FaIl. Daron Acemoglu and James A. Robinson.
- Testing Theories of American Politics:Elites, Interest Groups, and Average Citizens. Martin Gilens, Princeton University, and Benjamin I. Page, Northwestern University.
- The Reform Agenda. Speech by Angel Gurria, OECD Secretary-General.