The Retreat of Western Liberalism

by Edward Luce

By one recent historical measure, China and India in 1750 produced three-quarters of the world’s manufactures. On the eve of the First World War their share had dropped to just 7.5 per cent.

But the fact that the Industrial Revolution took place in Europe, rather than in Asia, played a more critical role in China’s fall from grace than the often-sordid tale of Western exploitation. China and India were not so much drained of wealth – though much of that took place – as they were rapidly overtaken by the West’s superior machine.

‘If we take the long view,’ writes Hugh White, Australia’s leading Sinologist, ‘the rise of India and China today is less a revolution than a restoration – a return to normal after a two-century interlude.’

to first-comers in the feverish westwards push that came after the Civil War. Had America instead chosen to auction the undivided land to the highest bidders, the US would now have a Latin American-style hacienda economy. The railroad barons would have gobbled up most of the land and converted it into vast estates.28 America also made public land grants to set up new universities across its rapidly opening landscape. Each of the big Western countries consciously opted to spread skills and assets to its poor.

The golden decades of the post-war era bore out the theory of declining inequality. But over the last thirty years that has gone into reverse. During those decades, the share of the US economic pie divided between labour and capital was roughly 70:30.29 Capital’s share – the flows taken up by returns on financial assets rather than wages and salaries – has since risen to a level not seen since the days of The Great Gatsby. The gap between the pay of the average chief executive and their employees has risen tenfold since the late 1970s to around four hundred.30 Europe has seen varying rates of rising inequality, with Britain and Spain recording the fastest-rising Gini coefficient – the measure of inequality – and Germany and Scandinavia the least.

In 1970 only about one in seven American families lived in neighbourhoods that were unambiguously ‘affluent’ or ‘poor’.40 By 2007 that number had risen to almost one in three. ‘When

Almost two-thirds of London voted to stay in the European Union. The rest of England and Wales disagreed. In spite of being home to fewer than one in seven people in Britain, London accounts for almost a third of its gross domestic product. Similarly, every single one of America’s 493 wealthiest counties, almost all of them urban, voted for Hillary Clinton.43

To the West’s economic losers, cities like London and Chicago are not so much magnets as death stars.

As the city’s essential workers, its senior police officers and school heads are priced out of town, they are replaced by wealthy cosmopolitans who divide their lives between different locations. The number of unoccupied apartments in New York rose by almost three-quarters at the turn of the century to thirty-four thousand in 2011.49 London has witnessed similar growth. The new residents then lock in their gains by restricting land use, which keeps values high. Richard Florida calls them the ‘new urban Luddites’, who exploit an ‘enormous and complex thicket of zoning laws and other land use regulations’ to keep the others out. Tyler Cowen has coined a new acronym to replace Nimbys (Not in My Backyard): Bananas (Build Absolutely Nothing Anywhere Near Anything).50 Such risk aversion breeds its own failure.

Rather than being shaped by those who live there full-time, the characters of our biggest cities are increasingly driven by the global super-rich as a place to park their money. Many of the creative classes are being edged out. Urban downtowns have turned into ‘deadened trophy districts’. New York’s once-bohemian SoHo is now better known for its high-end boutiques than its artists’ studios. SoHo could nowadays be found in any big city in the world. ‘Superstar cities and tech hubs will become so expensive that they will turn into gilded and gated communities,’ Florida predicts.51 ‘Their innovative and creative sparks will eventually fade.’ Karl Marx was wrong: it is the rich who are losing their nation, not the proletariat. The gap between global cities and their national anchors is already a metaphor for our times.

In contrast to earlier disruptions, which affected particular sectors of the economy, the effects of today’s revolution are general-purpose. From janitors to surgeons, virtually no jobs will be immune. Whether you are training to be an airline pilot, a retail assistant, a lawyer or a financial trader, labour-saving technology is whittling down your numbers – in some cases drastically so. In 2000, financial services employed 150,000 people in New York. By 2013 that had dropped to 100,000. Over the same period, Wall Street’s profits have soared. Up to 70 per cent of all equity trades are now executed by algorithms.

Their business model is the opposite of what Henry Ford did when he raised the wage he paid to factory employees to $5 a day, a sum that in the 1920s would afford a comfortable middle-class lifestyle. Three decades later, Ford switched his model when he began to invest in automation. On a tour of the plant with Walter Reuther, the auto union leader, Ford pointed at the robots and said: ‘How will you get union dues from them?’ Reuther replied: ‘How will you get them to buy your cars?’69 It was a good question. We might ask the same today of Google or Facebook. The new economy requires consumers with spending power – just as the old one did. Yet much like the farmer who eats his seed corn, Big Data is gobbling up its source of future revenue. ‘It’s not a result of some evil scheme,’ writes Lanier, ‘but a side effect of an idiotic elevation of the fantasy that technology is getting smart and standing on its own without people.’

Karl Marx predicted that capitalism would push the workers of the world to unite. He got it back to front. It is the elites who are loosening their allegiances and workers who are reaching for national flags. This is hardly a vision of social peace. ‘The rich will live in gated communities, and secure compounds, that are protected by drones and connected by driverless cars,’ predict Yascha Mounk and Lee Drutman, two of the sharpest political scientists around. ‘Ever smarter surveillance technologies will help to monitor the activities of the malcontents outside . . . ’70 Elites of the world unite! You have everything to lose.

Summers complained of ‘the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered’.75 By 2016, he was warning that the public’s tolerance for expert solutions ‘appears to have been exhausted’. He advised a new ‘responsible nationalism’, which would ‘begin from the idea that the basic responsibility of government is to maximize the welfare of its citizens, not to pursue some abstract concept of the global good’.76 The global elites, in other words, need to catch up with how most people view the world – not the other way round. I believe what Summers is saying now is closer to the truth.

The world’s elites have helped to provoke what they feared: a populist uprising against the world economy. Globalisation is going into reverse just as the impact of new technology is showing signs of picking up. In his Harvard class, Rodrik offers students a choice: Should we globalise democracy, or restrict it at home? Students always vote strongly for global democracy. But if it does not work at the European level, what chance would it stand worldwide? Digital democracy, meanwhile, is an empty slogan. The other choice – autocracy – is a bleak prospect, though a disturbingly broad range of nations are edging towards it. Which leaves us with one practical alternative: abandoning the drive to deep globalisation. Rodrik calls this ‘thin globalisation’. I prefer to think of it as the last chance for liberal democracy.

By this stage Obama was hopelessly conflicted. On a 2015 trip to Ethiopia, he congratulated its government on being democratically elected following a general election in which the ruling party had taken every single seat. Shortly afterwards Addis Ababa launched a crackdown on its opponents that resulted in hundreds of deaths. If America’s president was in two minds about democracy, how was the rest of the world supposed to feel? It was on Obama’s watch that the tally of global democracies fell most sharply. The world now has twenty-five fewer democracies than it did at the turn of the century. In addition to Russia and Venezuela, Turkey, Thailand, Botswana and now Hungary are deemed to have crossed the threshold. According to Freedom House, more countries have restricted than expanded freedom every year since 2008.5 ‘There is not a single country on the African continent where democracy is firmly consolidated and secure,’ says Larry Diamond, one of the leading scholars of democracy.

On the eve of the millennium, the Third Way leaders, among them Clinton and Blair, Germany’s Gerhard Schröder, France’s Lionel Jospin and Italy’s Massimo D’Alema, met at a grand conference in Florence – a fitting Tuscan setting for such a celebratory gathering. Across the Western world, the new left had ushered in the dawn of the classless society. People talked of a post-ideological age. The Third Way had remade politics. Lip service was still paid to the blue-collar worker. But the new left’s chosen politics was a form of anti-politics in which ‘whatever works’ had apparently replaced ideology. Beneath them was the void. ‘I was never really in politics,’ Blair told the BBC in 2000. ‘I never grew up as a politician. I don’t feel myself a politician even now.’ All of which would have been fine if the blue-collar classes had disappeared. Many of their old jobs certainly did. But when the economic tide went out in 2008, it suddenly became clear how many people had been swimming naked.

Mark Lilla, a professor at Columbia University, called for an end to ‘identity liberalism’. The American left had ‘slipped into a kind of moral panic about racial, gender and sexual identity that has distorted liberalism’s message,’ he wrote.27 Moreover, if the Democratic standard-bearer insisted on namechecking different groups at her rallies she had better mention everybody, otherwise those left out would feel resentful. Lilla also took issue with the liberal post-mortem on Mrs Clinton’s defeat that laid the blame on a racially charged ‘whitelash’ against multicultural America – a verdict that was at odds with the revealed motivations of many Trump voters. ‘This [post-mortem] is convenient because it sanctions a conviction of moral superiority,’ wrote Lilla. ‘It also encourages the fantasy that the Republican right is doomed to demographic extinction in the long run – which means liberals have only to wait for the country to fall into their laps.’ As a professor of humanities in Manhattan, Lilla has impeccable liberal credentials. A colleague at Columbia nevertheless wrote a riposte to Lilla’s piece that branded him a white supremacist.28 Yet Lilla was on firm ground. Fascism is based on group rights. Liberal democracy is founded on individual rights.

But by giving a higher priority to the politics of ethnic identity than people’s common interests, the American left helped to create what it feared. The clash of economic interests is about relative trade-offs. Ethnic politics is a game of absolutes. In 1992, Bill Clinton won the overwhelming majority of non-college whites. By 2016, most of them had defected. Having branded their defection as racially motivated, liberals are signalling that they do not want them back. ‘Liberals should bear in mind that the first identity movement in American politics was the Ku Klux Klan, which still exists,’ wrote Lilla. ‘Those who play the identity game should be prepared to lose it.’

In continental Europe, the more generous the welfare system, the more bitter the reaction against immigrants. The Danish People’s Party now takes more than a quarter of that country’s once reliably social democratic working-class vote. In Holland Geert Wilders’s Party for Freedom takes an even higher share. (Much as people prematurely celebrated the Austrian Freedom Party candidate’s defeat in December as a blow against populism, Wilders’s Party for Freedom’s poor second-place showing in Holland in March came with a sting. The whole political spectrum had shifted towards Wilders’s Islamophobic agenda.) France’s National Front used to speak for the farmers and small businesses of La France profonde, which opposed high taxes. After Marine Le Pen took over the leadership, she converted it into a party of the working classes. In a sharp rupture from her Holocaust-denying father, Le Pen has set herself up as the defender of France’s social contract against ‘the Islamic occupation’ – a phrase that instantly brings to mind the Nazi occupation. ‘National solidarity is for the nationals,’ she said.36 Le Pen knows her market.

Eribon’s tale is about the elite left’s divorce from the working classes. These elites were what Marx called the vanguard of the proletariat – the enlightened bourgeois who would lead their revolution. Nowadays Lenin would be teaching cultural studies at the Sorbonne. All traces of Marxist romanticism have been shed. So have the names. Working class has been supplanted by left behind. Once romanticised, they are now denigrated. But the elite leftists have only swapped one myth for another. There is nothing new about working-class populism. It can go in many directions depending on the situation. America’s populist surge in the late nineteenth century produced both the Ku Klux Klan and the progressive income tax. The latter’s champion, William Jennings Bryan, fought for the little guy who was being ‘crucified on the cross of gold’. His followers hated ‘the plutocrats, the aristocrats, and all the other rats’.41 Bryan ended his career arguing against the theory of evolution as a prosecutor in the famous Scopes Monkey trial.

oikophobia, literally an aversion to home surroundings. In reality, it means fear of your own people – the opposite of xenophobia. The term was invented by Roger Scruton, the conservative philosopher, to describe the global elitist who fears the provincial masses and looks down on their national loyalties. ‘The oikophobe is, in his own eyes, a defender of enlightened universalism against local chauvinism,’ Scruton said.43

As the sharecropper song went, ‘I’d druther be a Nigger, an’ plow ole Beck, Dan a white Hill Billy wid his long red neck.’ 44 Variously, they have also been called lubbers, offscourings, crackers, hillbillies, clay-eaters, low-downers, degenerates, white niggers and trailer trash. The term white trash has been around for two centuries and is still very much in use.

It took a while for the privileged classes to acclimatise to the universal franchise. It took them still longer to think of it as a good thing. The first time the British government publicly championed the country as a democracy was in 1916, in the depths of the First World War, when it was grasping for a large enough cause to justify the deaths of hundreds of thousands of young men in the trenches. Britain’s chief enemy, the Kaiser’s Germany, was autocratic. One of Britain’s main allies, Russia, pulled out of the war after its Tsar was overthrown (and then executed) in the Russian Revolution. After they had seized control, the Bolsheviks instantly became the new – and far more menacing – bête noire in the capitals of Europe. More democracy at home was suddenly an essential tool of survival. Woodrow Wilson, the US president, said America was entering Europe’s great war in order to save democracy. That, too, was a novelty for Americans. It became second nature for the US, Britain and France – and, once the Cold War with the Soviets had begun half a generation later, the rest of western Europe – to hold up democracy as the crown jewel of Western civilisation. By historic standards, a hundred years is comparatively short. Another century might feel like a biblical leap of faith nowadays.

Whatever else you can say about the EU, it is not a democracy. ‘European integration, it needs to be emphasized, was part and parcel of this comprehensive attempt to constrain the popular will,’ says Harvard’s Jan-Werner Müller.49 ‘It added supranational constraints to national ones.’ The system of anonymous committees that set the rules for its member states – from the minutest product regulations to the limits of tax and spending – is virtually impervious to democratic control. They call it comitology.

The mandarins of Brussels, like Hillaryland, are blind to how people perceive them. Brexit has only reinforced their worldview. The verdict in Brussels is that Britain’s exit is an opportunity. It will allow European integration to pick up more speed. It is an open question whether Brussels’s response will trigger more Brexits in the years ahead. The same obliviousness applies to Washington, where I have lived for the past decade. Ninety-one per cent of Washington voted for Hillary Clinton in 2016. Trump’s victory has only bolstered the view that people outside the capital’s beltway are ignorant and malevolent.

The public’s idea of democracy is that it is a simple process in which people elect their representatives to carry out their instructions. Scholars call this the ‘folk theory of democracy’.50

The sophisticated view of democracy is that it can only work if it is checked by a system of individual rights, independence of the judiciary, the separation of powers and other balances. There is no such thing as the popular will, just a series of messy deals between competing interests. It is hard to watch any legislature making laws without thinking the whole business is corrupt. As Bismarck put it, ‘Laws, like sausages, cease to inspire respect in proportion as we know how they are made.’

Western populism is an ‘illiberal democratic response to undemocratic liberalism’.51 The British and American people supposedly reclaimed their sovereignty in 2016. I call it the Reaction. It is pretty clear which direction the Western elites are bending. Davos is no fan club for more democracy. Having hived off many areas that were once under democratic control (such as monetary policy and trade and investment), post-2016 Western elites now fear they have not gone far enough.

The poor are now democracy’s strongest fans, the rich its biggest sceptics. In 1995, just 5 per cent of wealthy Americans believed army rule would be a good thing. By 2014 that had more than tripled. An even higher share of upper-income millennials support autocracy. People tend to form political beliefs in their early years and then stick with them for life. If today’s rich young are tomorrow’s thought leaders, democracy has a shaky future. This survey’s data only goes up to 2014. If it had been taken after Trump and Brexit, the gulf between how rich and poor see democracy would be even wider.

As we cross the frontier to swarm drones and robot soldiers, the rich will have less need of large-scale civilian armies – a key reason they expanded the franchise in the nineteenth and twentieth centuries. Science fiction likes to depict a dystopia in which the robots have taken over. A less fantastical idea is that the robots will indeed take over. But it will be at the behest of a narrow elite of human masters.

Much like London’s vote against Brexit, or Washington’s endorsement of Hillary Clinton, more than half of Moscow voted against Putin. The gulf between America’s metropolitan elites and those outside of the cities is no less wide than that between Moscow and its vast hinterlands.

In his masterful survey of populism, Jan-Werner Müller takes up cudgels against those who argue populism is democratic. A true populist is not just opposed to the elites, he is also an enemy of pluralism. Without a plural society democracy loses its foundation. The populist never says ‘We are the 99 per cent,’ as Occupy Wall Street did during its Zuccotti Park protests. The populist claims to speak exclusively for the 100 per cent. Only they can know the identity of the true people. The

Though Obama was instinctively a realist, the Asia pivot was based on a fundamentally neoconservative worldview, which Hillary Clinton shared. If China clung to its autocratic path, it would pose a growing threat to others. By the same token, if it embraced a Western-style political system, it could be counted on to behave in a law-abiding way. The Asia pivot arose from the pessimistic view that China was showing no signs of democratising. From now on, the Pentagon would split its assets equally between the Atlantic region and the Asia Pacific region. America’s global deployments had previously been distributed 60:40 in the Atlantic’s favour. The US would open new bases in Darwin, Australia, and the Philippines. Washington would also take a more robust stand on the disputed islands in the South China Sea – what Beijing calls the first island chain.

But China has been unified for less than half of its 2200-year history. Just as America fears ideological competition, and Britain has historically dreaded a unified continent, so China is constantly paranoid about internal dissolution.

But Hungary’s Viktor Orbán was right about one thing: Europe should have secured its external border before it scrapped its internal ones. The free movement of peoples is now threatened by the populist backlash against the dramatic increase of outside arrivals. The amount of money spent on Frontex, Europe’s fledgling border agency, is a fraction of what it needs to police the borders. Tough though it sounds, Europe cannot solve the Middle East by importing it. Nor does it have the capacity to absorb millions of Africa’s economic migrants. Europe needs to make extremely difficult trade-offs to save itself.

Some time during the 1960s, the Western left abandoned the politics of solidarity to embrace one of personal liberation.

The numbers speak loudly enough. But they do not capture the indignity people feel. Is the desire for respect an economic or a social aspiration? Or is it cultural? I would suggest the craving for dignity is universal. When people lose trust that society is treating them fairly, they drift into a deeper culture of mistrust. It should be little surprise that they come to view what the winners tell them with a toxic suspicion. Remind yourselves of how people reacted when the big banks were bailed out during the Great Recession. It was the taxpayer who picked up the bill. Ordinary people were still held to account. Millions of homes were repossessed. It is not enough to say that everyone would have been worse off if the banks had been allowed to go bankrupt. That was true. But society is not a balance sheet. People interpret the world in moral terms. They have narratives. The public noticed that the Obama administration failed to push through a single criminal conviction for what was the grandest rip-off in US financial history. Under Trump, we must get reacquainted with hearing about the world in Old Testament terms, yet I have no doubt Wall Street will still be deemed worthy of New Testament forgiveness.

One critical goal must therefore be to lift the rewards of technical and service jobs in the West. In different areas, Germany, Scandinavia and other parts of Europe are good at this. By giving people genuine vocational skills, they raise the quality of what they do. The English-speaking world has forgotten how to do this. Instead of valuing high-quality service, society demands it at the lowest price. Another goal is to educate people to cope with a world in which machines are taking most of the old jobs. This means reviving a focus on the humanities, including basic levels of political literacy. Education should not just be about getting a job. It must equip us to be full members of society.

Ancient thinkers always thought the rich posed a greater threat to the republic than the poor: they cling on far more tenaciously to what they have. ‘No tyrant ever conquered a city because he was poor and hungry,’ said Aristotle.