Copyright
Copyright © 2019 by Michael O’Sullivan
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Library of Congress Cataloging-in-Publication Data
Names: O’Sullivan, Michael, 1957–author.
Title: The levelling: what’s next after globalization / Michael O’Sullivan.
Description: First Edition. | New York: PublicAffairs, [2019] | Includes bibliographical references and index.
Identifiers: LCCN 2018049629| ISBN 9781541724068 (hardcover) | ISBN 9781541724082 (ebook)
Subjects: LCSH: Equality. | Social stratification. | Populism.
Classification: LCC HM821 .O88 2019 | DDC 305—dc23
LC record available at https://lccn.loc.gov/2018049629
ISBNs: 978-1-5417-2406-8 (hardcover); 978-1-5417-2408-2 (ebook)
E3-20190417-JV-NF-ORI
CONTENTS
COVER
TITLE PAGE
COPYRIGHT
DEDICATION
ONE
THE LEVELLING
Brexit, Trump, Noise, and Disruption
TWO
THE TIDE GOES OUT
Running Out of Breath Economically, Losing Patience Politically
THREE
WHAT’S NEXT?
Déjà Vu All Over Again
FOUR
THE LEVELLERS
Agreements of the People
FIVE
CAN THEY DO IT?
Equality, Accountability, Responsibility
SIX
GREAT COUNTRIES OR STRONG COUNTRIES?
Katherine Chidley’s Dilemma
SEVEN
A WESTPHALIA FOR FINANCE
Learning to Live Without the Central Bank Comfort Blanket
EIGHT
A MULTIPOLAR WORLD
As the World’s GDP Moves Eastward
NINE
A NEW WORLD ORDER
Levellers or Leviathans?
TEN
THE HAMILTON PROJECT
What Would Hamilton Do?
ELEVEN
LOOKING AHEAD
From Noise and Disruption to… What?
ACKNOWLEDGMENTS
DISCOVER MORE
ABOUT THE AUTHOR
BIBLIOGRAPHY
NOTES
INDEX
For Myrna
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ONE
THE LEVELLING
Brexit, Trump, Noise, and Disruption
THAT OUR WORLD IS CHANGING AT A TECTONIC LEVEL IS CLOSE TO UNDENIABLE, yet we often do not seem able to see beyond headline-grabbing events of recent years—the election of Donald Trump, Brexit, and new governments in Mexico and Italy, to name a few. These events simply represent the smashing of the old order; they are the detonators, the wrecking balls of the system that has grown up since the fall of communism.
The Levelling is about how the center of gravity in our world, societies, and economies is changing, the confusion those changes create, and the ideas that will help bring new structure to what is a disordered world. At the time of writing, the debate in countries as diverse as the United Kingdom, China, the United States, and Brazil is focused on uncertainty and the breakdown in well-established ways of doing things. Many people feel that their countries have strayed off the path to progress, and many more feel that the road ahead is an uncertain one.
My aim is to provide the frameworks and ideas that can help breathe new life into politics, policy making, and economic growth. They are not magic bullets but simply ways of focusing attention on fundamentally important issues, such as what makes a stable society and how to think through important political issues of the twenty-first century, including the role of intangible infrastructure in generating economic growth, the demise of international institutions, the rise to power of central banks, and the legal aspects of genetic engineering. The world we live in today, be the reader in Shanghai or Santiago or Stockholm, is very different from that of any other point in history. Forms of human interaction like social media didn’t exist before. In economics, central banks have never before exerted so much influence on the world economy. In markets, the United States used to be the locus and architect of stability across emerging markets, either through the International Monetary Fund (IMF) or the US Treasury Department; now it is the provocateur of volatility. This time, as they say, is different.
There is also a sense that the cycles of the rise and fall of nations are repeating themselves and that, as over the past four hundred years, we are again grappling with basic issues such as the quality of public life, equality, and the workings of democracy. As a result, history can help prod today’s debate in the right direction. It also provides ammunition for many scaremongers, and warnings—with some reason—that the world will soon revisit the bleak 1930s are now commonplace.
There is plenty in our history books to both inform and mislead us as to what might happen next to our societies. However, one period I am drawn to is the middle of the seventeenth century and its momentous events. The end of the Thirty Years’ War through the Peace of Westphalia gave rise to the concept of nation-states as we know them. It was also a moment when laws and institutions were formed and began to be respected.
In England and, later, the United States and France, the first stirrings of democracy arose, along with the notion of popular rule. My own country, Ireland, is bounded by these three Atlantic powers, and much of its history has been determined by its relationship with them. I have spent my life moving between Ireland, England, America, France, and Switzerland and am naturally biased toward this corner of the world and its heritage. One thread that runs through all four Atlantic-facing countries is the idea of the republic. In simple, modern terms, a republic is a state that is run by its people, with equality among them. I would add strong institutions and laws to this mix.
The echo of this idea still courses powerfully through the twenty-first century. In France, the currency of the “republic” is still strong and prominent. In America, the institutions and checks and balances created by the Founding Fathers are still working and relevant. One of those Founding Fathers, Alexander Hamilton, will make a guest appearance later in this book.
The American and French Revolutions represent the explosion into life of democracy and what we understand as the republic, but their seeds were sown a century earlier, in the mid-seventeenth century. A hidden gem in English
history—which gives its name to this book—is a good basis for the repair of politics, economics, and finance today. Later in the book, we will discuss this gem in full, and at the risk of perhaps sounding a bit like the writer Dan Brown, I will take you on a tour of old churches, missing manuscripts, and historical intrigues.
To give a quick glimpse, the inspiration for this book came from running alongside the River Thames, frequently passing St. Mary’s Church in Putney. Having heard of the Putney Debates, which took place there in 1647, I eventually stopped to explore the church and, by extension, the Putney Debates. The debates have recently been acknowledged as one of the most important moments in English history and as the crucible of modern constitutional democracy. More than a year earlier, King Charles I had lost the English Civil War—a conflict fought over how England would be governed—to forces led by Oliver Cromwell. The debates took place between the officers and the rank and file of Cromwell’s New Model Army to discuss the future constitution of England following the imprisonment of Charles.
The largest group involved in those debates, the Levellers, crafted arguments for equality and constitutional democracy, arguments that they framed as the “Agreements of the People.” Those agreements resonate today as the first popular, written expressions of constitutional democracy. With democracy now under attack, it is to the Levellers we must turn for inspiration.
As political ruptures occurred across Europe during and after the eurozone crisis and as the 2016 US presidential campaign intensified, the Putney Debates and the Levellers who inspired them kept coming to my mind. One of the first texts on the Levellers I read was The World Turned Upside Down, by the historian and former master of Balliol College Christopher Hill. In it Hill tracks the emergence of radical political groups in mid-seventeenth-century England as they played a formative role in the emergence of democracy as we now know it. It is hard not to draw comparisons between the Levellers’ demands and the strong desire by many people in many countries today for more satisfying political choices and more balanced economic circumstances.
The Levellers’ story and the agreements they crafted deserve to be dusted off and reexamined. Their aims, their sentiments, and the forces that propelled them are relevant to the world in which we live and provide an apt starting point for processing and ordering the many changes percolating through the international political-economic order today. Their achievement was to set out a contract between the people and those who represented and governed them. Today there is little sense that such a contract is in place.
In fact, today the contract people thought they had with politicians, governments, institutions, and potentially each other is disintegrating. If anything, the order of the last thirty years is crumbling. Across politics, economics, finance, and geopolitics, the world has been and is increasingly dogged by a series of strange events, puzzles, and rising tensions. In economics, for instance, we have growth with low productivity, high profit margins but tepid wage growth in the United States, and record indebtedness at the same time as odd, multicentury lows in interest rates in countries like France and Spain. Wealth creation and wealth inequality are both at all-time highs, though many business leaders and politicians don’t seem to mind this contradiction. These phenomena are rare historically and have tended to be followed by social, political, and economic crises. Predictably, I can cite the late 1920s as an example.
Additionally, central banks, now more powerful than governments, own enormous pools of assets, which they bought in an effort to keep the side effects of the global financial crisis at bay. As they unwind these holdings, this will make financial markets more jumpy and fragile economies more vulnerable.
In politics, there is Brexit, the election of Donald Trump, and the emergence in Europe of new, mostly right-wing political parties that are starting to disrupt traditional parties and politics. The rise of radical politics is spreading to emerging nations, notably Brazil. Voter volatility, apathy toward established political parties, and distrust in politics have risen to levels not seen since the Second World War. Gravely, democracy as a political choice looks as if it has peaked. More countries are now veering toward rule by strongmen, or to be more polite, toward “managed democracy.” Other countries no longer see democracy as an indispensable part of the road map of progress and development.
In geopolitics, the rise and fall of nations is playing out at a seemingly accelerated speed. The election of Emmanuel Macron now gives France a leader with the ideas and energy to lead Europe, at a time when Angela Merkel’s domination of European politics draws to a close. Internationally, the United States is no longer seen as a leader, and some places see it as an aggressor. Syria has used chemical weapons, there are calls for Germany to have nuclear weapons,1 North Korea has fired missiles over Japan as part of its “path to disarmament,” and the internet has entered the arsenal of warfare.
If Crisis or War Comes
Smaller countries are not immune to this upheaval and are perhaps emblematic of the new fears and geopolitical threats that nations face today. For example, in May 2018, Swedes were issued a booklet entitled If Crisis or War Comes.2 They have not had such an alarming communication since 1961, when the fear of a nuclear war was very real.3 The aim of the booklet is to teach Swedes how to respond in the event of total war (cyber and propaganda attacks as well as military conflict), terrorist attacks, and extreme climate change. Sweden, alert to risks from Russia, has increased military spending, introduced conscription, and begun holding full-scale military exercises.
Beyond Europe, one of the world’s other megatrends is the Chinese Dream.4 China’s quest is to regain the level of economic and geopolitical power it enjoyed up to three centuries ago and “make China great again.” However, it is likely to face a reality check over the next five years as its economy slows, its citizens begin to desire more social and political self-expression, and America’s elite seeks to check China’s geopolitical progress. There was a time when emerging markets like China would sit quietly while Western nations and institutions told them what to do, but in the post-global-financial-crisis world, the West is no longer in a position to do so.
The sense of topsy turvy is not restricted to economics and international relations. The structure of our everyday lives is more volatile than ever before. The way we use our time and socialize has been utterly changed by social media. Obesity is now a significant health issue for nearly one in three Americans. More broadly, in a number of developed countries, the level of what the United Nations calls human development (e.g., life expectancy and education) is stalling and in some cases reversing. To cap it all, sixteen of the seventeen warmest years on record have occurred since 2000.
Though my intention is not to be pessimistic or to scaremonger, there is plenty of scope to heap more misery on the outlook for the future. What is astonishing is that so many of these trends are ignored. To brush them off ignores some very deep undercurrents—such as lack of political accountability, inequality, rapid social change that fuels a profound dissatisfaction with the political class, the diverging fortunes of large corporate actors and households, and the slowing of globalization*—and barely recognizes the concerns and issues that everyday people now grapple with and express through increasingly contorted political choices.
As at other turning points in history, many policy makers act as if a continuation of the glorious and happy past is the only way forward. A large number of politicians, academics, policy makers, business consultants, and writers still believe that globalization as we have experienced it over the past decade or so will persist in more or less the same fashion, or better.
For instance, recent work from the McKinsey Global Institute points to soaring digital globalization and stable financial globalization, but in my view, finance and technology will soon run into the reality of a more fractured, multipolar world. For example, China increasingly controls its internet space, partitioning it off from the global internet.
Many politi
cians and commentators still dismiss voter behavior as populism while failing to recognize that ordinary people feel increasingly confused and uncomfortable about the world they live in. Their consensus attitude might be summed up by a quotation attributed to Winston Churchill: “The best argument against democracy is a five-minute conversation with the average voter.” Already, the example of the Levellers looks apt—the key social division in their day was that between the elite (the Grandees) and the ordinary people (the Levellers), which chimes with political debate today.
The same complacent mind-set sees financial markets thriving despite many structural economic risks. It also presumes that the liberal democratic order will continue to act as a beacon to emerging nations. It is in the interest of many politicians and commentators to believe that nothing will change.
This book sets out a different view, one of the world entering a new era, a fundamental transition phase. On almost every vector, the world is turning away from globalization and toward a multipolar order. This process is undercut by many risks—debt is too high, humans are less productive, trade and military tensions are rising, to name a few.
The exciting and challenging element of the new era is that it is one where new political templates and parties are either in the process of being created or will need to be created, a world in which a new framework for organic economic growth will need to be discovered, and a world where many artificial stimulants to growth—such as indebtedness and central-bank asset purchases—will need to be pared back. In this emerging multipolar world, many of the international institutions of the twentieth century will become redundant as new formations of nations and new institutional arrangements spring up.
The Levelling Page 1