It is a known fact that any political or economic system has a natural life span. As such, economic liberalism, widely considered the best socio-economic system ever devised by humans by its proponents, cannot escape that time-honored reality. Moreover, the strength of its appeal (consent of the governed) and the benefits associated with it (economic prosperity) lead many to believe in its infallibility and that no other alternative political system could pose a serious challenge to its existence, a dubious rationale that needs to be revisited in light of the current global economic downturn. Indeed the writing is on the wall, but its supporters remain oblivious to it. Generally, political-economic systems crumble because of their failure to meet the expectations of their citizenry. For example, Soviet communism fell apart not because of moral deficiencies or a fatal blow from its nemesis (western capitalism) but its apparent failure to produce the expected result: an egalitarian and prosperous society free of the worst human excesses.
Apparently, only a few western policy makers see the symbiotic relationship between meeting the people’s expectations and the success or failure of an economic system. The reason may the divergent ideological structure of communism and capitalism (one relying on the omnipotence of the state and the other on the ability of the individual), even though the purpose of government is fundamentally the same: meeting the citizenry’s expectations. Fittingly, the current global economic failure not only exposes economic liberalism’s flaws but could well bring its demise and by extension the retreat of democracy in many countries since the path of least resistance to needed reforms has always been repression. We are inevitably heading toward fascism with a human face, whereas the framework of democracy will continue to exist with the state determining its application to a greater purpose: aggrandizement of its power.
As the ascent of China as an economic superpower attests, economic prosperity is based on manufacturing not outsourcing and other financial gimmicks that constitute the mainstay of economic liberalism. With banks lending money to entities or individuals and then betting on their clients’ inability to repay the loans, one is left with the impression the system is running out of options. Moreover, the safety net against social grievances (welfare state) in place in Europe and the U.S is in danger of collapsing because of the deteriorating economic conditions that require painful and politically unpleasant adjustments.
It is this palpable fact that leads Jose Manuel Barroso, the European Trade Union Commission President to issue a warning two weeks ago that countries such as Portugal, Greece and Spain run the risk of falling victims to military coups and popular uprisings. Is this the cry of an alarmist or the reasoning of a wise man? The story does not end there. Britain, France, Italy and, to a lesser extent, Germany are swamping under mountains of debts, low growth and mounting social pressures such as ageing population, low birthrate and the perennial immigration issue, which in the eyes of many, is threatening the ethnic and cultural fabric of these nations. Granted the situation is nowhere near the dark years of the 1930s that facilitated the rise of Adolf Hitler in Germany and subsequently WWII, but the similarity should not be discounted on the account of economic liberalism being the best anchor against totalitarianism. After all, one needs only to remember that it was actually the war that saved the democracies, as Germany’s economic model in the 1930s was openly admired in Britain, France and the U.S because it provided stability and prosperity, the twin pillars of any economic system.
More worrisome is the fate of the U.S economy whose debt ratio this year of 13.6 trillion is 93% to its gross domestic product (GDP) of 14 trillion of dollars, according to a Treasury Department report to Congress. While no one expects a Greece-type scenario in regard to the U.S debt, as long as the dollar remains the main global currency, its negative effect on investments, the engine of growth, is clearly a drag on the prospect of a global recovery. Even Japan, the world’s second largest economy, once lauded for its high saving rate, is staggering under the weight of debts and anemic growth. Naoto Kan, who became the fifth Japanese prime minister in less than four years, cautioned his countrymen on the magnitude of the problem and made it clear that urgent reforms are needed to prevent a catastrophe.
With the developed world sucking up every available dollar and euro to finance their astronomical debt, it is not hard to imagine the reverberations in the underdeveloped nations. The relevant question is: will the developed countries agree to a restructuration of the system, which requires painful sacrifices or continue to bet on its infallibility? This is not the biblical Joseph interpreting the dream of the Pharaoh of Egypt. The writing is on the wall for everyone to see, except that western policy makers, confident of the infallibility of economic liberalism, consider these latest developments cyclical adjustments. They need to remember that economic power is the mainstay of the West’s political power and the surest way to military confrontations with ascending nations, like China and India, is economic dysfunction at home. With China totalitarian gobbling up Africa’s mineral resources and the west looking askance, the end of economic liberalism and, by extension, democracy, is drawing closer.