At the end of World War II, the movers and shakers established a new economic order. They called it "The Washington Consensus." Glen Pearson writes:
The economic agreement of recent decades is fading. It was termed the “Washington Consensus,” and it was strong and adept enough to draw in the predominant economies of the West. Biden was part of the Washington establishment that helped build that consensus. Now, like Trump before him, he’s made the political and economic calculation that putting American interests above all those of its partners is the only way to get out of the financial hole in which America has mired itself.
As noted this week in the Atlantic: “Ever-greater global interdependence is no longer desirable.” When fully carried out, this new policy approach will have challenging implications for America’s trading partners, including its neighbour to the north.
Many economists feel the global financial system is now in free motion, no longer tethered to the shared belief that capitalism and the free market, for all of their inequities, are nevertheless the best approach to take into the future. Covid revealed the weakened underbelly of the global system, but it has been primarily the Chinese belief in pulling away from the global consensus and establishing its own markets and partnerships that has forced the rest of the world to readjust.
Biden’s key interest has been industrial strategy and how its renewal could help reshape the economic future of the nation he leads. China believes the same thing, as do certain elements in France, Germany, the UK, and India. It’s “looking out for Number One” time, and for a soft power nation like Canada that largely depends on global trade to leverage its economy, the hurdles ahead are bound to reshape the politics of today.
What does that really mean?
Ultimately, all this is bringing on a new age of economic nationalism. Citizens and institutions that feel they are losing out to the world system now want to control their own. They believe that shipping jobs and investments overseas only hollowed out local economies and they want their prosperity back. The wealth generated in the last few decades appears to millions to have been sequestered by the great and mighty and they want more of it for themselves. It’s a highly toxic and simple message. It’s also a highly dangerous one unless managed properly. In a world of “all against all,” there can only be a few winners.
Like politics and respectful negotiations, Main Street and Wall Street parted company years ago. We are now divided in a world, and in such a setting, national governments have to find a way to feather their own nest while still participating in the world economy. It will be a task fraught with risk but will likely grow in popularity with voters. There is no certainty that this new approach will bring the wealth and peace that so empowered the earlier days of globalization. No “sure thing” exists in economics. Everyone has their own opinion or policy. But if the politics guarding over economies turns on itself and ruins both our common purpose and historical partnerships, then all this new economic nationalism will be for naught. It’s a treacherous road we are entering and only a common accord can guide us forward. Splitting us increasingly into camps – political, economic, social, ideological – will ruin much of what is good in our Canadian consensus.
Buckle your seat belts. It could be a rough ride.
Image: slate.com
12 comments:
Naturally, the Washington consensus that democracy is best paired with capitalism is breaking down. The fruits of capitalism aren't being shared equitably. As US Justice Louis Brandeis said, "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both." The New Gilded Age isn't much interested in democracy. Is it any wonder that social cohesion has taken a hit?
The problem is that capitalism and democracy are not the best of friends, Cap. Capitalism does not accept the principle of sharing the wealth.
We need the likes of the 2 Roosevelt in our politics. DJF
I agree, DJF. They were from different parties. But both were progressives.
The collective US personality thinks that the world is a zero sum game. For them it is not good enough just to win, but someone must lose. Sanctions are all they understand and they are not working.
China, Russia, Ecuador, India, Saudia Arabia, Syria and many others are deciding there is no benefit playing on a board rigged against them and are forming closer ties.
A friend told me, 30 years ago, that the US would go to any lengths , including a nuclear first strike , to maintain dominance. We need to fear State Department talk of prearation for war with China.
We are entering what could be a very dangerous period, rumley.
I was going to repeat the age old comment of Marx saying capitalism would eat itself until i came across this updated version of it...
https://www.prospectmagazine.co.uk/ideas/economics/46322/the-zero-marginal-cost-societyor-how-capitalism-will-eat-itself
The above article reflects what is happening at the sharp end of the stick.
At the other end of the same stick where mere peons live and work; we in BC Canada are experiencing the exploitation of natural resources , driven by global market forces, reduced to internal bickering as the those resources have been raped not just for their immediate and local use but for the profiteers of the world.
When the shareholders of some world wide corporation is making decisions that affect the livelihoods of for example the fishermen and women of the tiny community of Tofino or Uclueleet BC , then it's down hill and the 'free ' market is no longer free!!
If the above link is to be believed , the world is about to turned on it's head.
Everything we have accepted since the industrial revolution is about to become immaterial.
TB
FWIW.
The two towns in BC i referred to have been decimated by globalisation as have many more.
It's happened before, TB. William Blake made the phrase "satanic mills" famous.
@TB
Way back in the mists of time I read a science fiction story where someone invented a duplicator. It could duplicate anything, even human beings. Rather than introducing a new age a small elite seized control of the technology and lived in a style that made louis XIV look like a pauper.
I think Rifkin is omitting a variable here. Zero Marginal Cost is great but who controls the energy sources that power all these industries? If energy is a public good then he may be correct, if a cabal can seize and control the energy sources then we may be back to the ancien régime or the Gilded Age.
@ Cap
Washington consensus that democracy is best paired with capitalism
I really think in international terms the Washington's view of the consensus was closer to "We are the biggest, baddest bully on the block; you do as we say and we say capitalism is good".
On and off for some time I have been trying to think of any example of independent US intervention that resulted it a stable democratic government evolving. I cannot think of one though I should check on Granada. Maybe Haiti in 1935?
I am mainly discounting post-war Western Europe as despite Britain and the Soviet Union's weakness after WWII, the USA did not have a free hand.
Can anyone think of an example?
@ DJF
We need the likes of the 2 Roosevelt in our politics.
Well, it depends on how you look at it. Both were members of the wealthy elite who understood that capitalism as it existed in the USA at those two periods in time had to be reformed or it would very likely die. I tend to think of Teddy, in particular, as the saviour of US capitalism.
As Owen says "both were progressives" {by US standards} but we may think that because we have been exposed to too much US propaganda or they were progressive because a lot of the poorer classes were picking up ropes and eyeing lampposts.
Let's see if these folks respond to what you say, jrk.
FDR , with his 1932 “New Deal” was a progressive compared to our Conservative Prime Minister of the day R. B. Bennett and the Leader of the Opposition, W. L. M. King. Bennett even thought Roosevelt had gone off the deep end with his socialist verging on communist ideas and policies.
1935 saw Canada vote in the Liberals under MacKenzie King who, like Bennett, thought the protesters, transient Rail Riders and the unemployed were lazy good-for-nothing bums and should just shutup go home. It took some time for King to allow work camps to come into being, although most seemed to be mere make-work projects.
It was FDR, not Canadians Bennett and King, that saw the plight of the Depression-time unemployed and did something about it by changing economic policies which John Maynard Keynes was promoting. (deficit spending in bad economic times)
The irony was very apparent when we went to war. The idea of a balanced budget went straight out the window when the “war effort” had to be supported.
I think capitalism is a good thing IF it is controlled from its’ excesses such as wealth and income inequality. If capitalism continues in its’ present excessive manner, it will collapse, climate change notwithstanding. DJF
That's what Karl Marx predicted would eventually happen, DJF. We may eventually prove him right.
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