The Empire is falling

The last few months have seen two electoral events which have shocked the political establishment. In both cases, the political class, intellectuals and polling organisations got it completely wrong, predicting electoral victories for the status quo, and being shocked by the victory of the anti-establishment options.

There has been a lot of analysis about what this means, why it has happened, and why it was missed. Most of this analysis, however, is wrong. The reasons for those votes are also completely wrong and, in many cases, will achieve completely the opposite outcome that the voters intended.

The elites are scratching their heads. Particularly, the progressive intellectual elites. How is it possible that large numbers of voters, in protest against the inequality and lack of opportunity they perceive in society, have voted for quintessential paragons of inequality? How can Donald Trump, a multibillionaire who has amassed massive wealth gained from the work of others, be seen as a better chance for the working class than more progressive political propositions? How can the British voters vote for an option which will clearly make their country, and particularly its working class, poorer, by destroying jobs and pushing the UK into a low corporate taxation model where workers share more of the burden? This seems to make no sense, but the fact is that it makes perfect sense.

These voters are angry and scared. The World is changing very fast, and it is becoming something completely different to the World they grew up in. Globalisation is going at breakneck speed, and has created huge wealth. However, it has also created huge inequality, which has been exacerbated by the 2008 recession, which brought about a huge, obscene even, transfer of wealth from the taxpayer to financial institutions and their shareholders. New millionaires are created every day in places like Silicon Valley. But, to a large percentage of the population, what these people do to become millionaires is incomprehensible. The thought that you can create technological tools, trade globally without barriers and be hugely successful very fast is an insult to the people who have not learnt the skills (and I use this sentence carefully because I think 99% of people have the capability) to take advantage of these opportunities. This is logical. The way of life of this section of society is under siege. They can see their jobs becoming extinct or irrelevant, they can see themselves being replaced, and they cannot see what the alternative is. Automation, as well as foreign competition, will render most of their occupations obsolete. And when this happens, how are they going to survive?

The inhabitants of Western economies have grown in an environment in which they were the privileged few. Despite the fact that global output and wealth was much lower 30 years ago than today, 30 years ago the great majority of it was shared between a few hundred million, in the West. Everyone else was brutally poor, and that was not our problem. What has happened in the last few decades is that we are suddenly having to share our wealth with many others. With billions of Asians and South Americans joining the global economy, manufacturing goods and providing services. These guys are training themselves and building their competitiveness, and they want a share of the global output. We, used to keeping the great majority of the output to ourselves, don’t like that.

The huge miscalculation is to think we can stop it. US and UK have extremely self centered views of the World economy. These views hail back to a time, not long ago, in fact less than a generation, when their markets, together with a few countries in Europe, were the only ones that mattered. They had the consumers and the spending power, and they therefore called the shots. They could choose who to trade with and in what terms. But this has changed. So now, Americans want to stop the effects of globalisation by building walls and isolating, and they think that will protect their jobs and their economy. But the World economy is going on outside America. Manufacturing, technical development, and services are produced everywhere and, more and more, consumed everywhere. By 2100, 9 Bn of the planet’s 11Bn population will be in Asia, Africa and South America. These markets don’t need the US and the UK. The World economy can continue to develop without them. By building walls, the Americans and the Brits will be keeping themselves outside of the World economy, not keeping others outside of theirs. China famously did just this in the XIV century. They were the World’s most powerful trading economy, the most advanced technological society. They were a long way ahead, technically and economically, of everyone else. And they had built that position through relentless trading over the silk roads and by sea. But, at some point in that century, the emperor decided that trading with outsiders was sharing Chinese wealth, and he reasoned that Chinese wealth, most of the known World’s wealth, should be for the Chinese people. As a result, China closed its borders. This allowed Europe and the Middle East to thrive without competition. Rather than sharing their wealth and leading global progress, China stepped out and conceded global leadership to incipient economies in Damascus, Baghdad, Cordoba, Spain, Venice and Genoa. Development continued, global trading accelerated, but China did not participate. They thought the global economy would not continue without them, that by closing the gates they were keeping wealth within, but they were actually keeping themselves away from the newly created wealth. It has taken China 650 years to regain their position in the global economy.

Now US and UK are doing the same. They are closing the gates to 6Bn consumers, to protect their markets of a few hundred million. They think they are losing their jobs to immigrants, when they are losing them to workers that compete from a distance and never need to visit their countries. Instead of taking advantage of their head start to provide higher end services and products to those growing economies, they stop trading and accelerate the change in the World Order. It has happened in Egypt in 700BC, in Greece in II C BC, in Rome in 476, in China in the XIV century, in the Middle East in the XVI Century and in Spain in the XVII Century. Now, it is the turn of the US and the UK. Old empires that prefer to ostracise themselves than to participate in more equitable development. Used to always winning, we don’t like competition.  

And this approach is not only doomed to failure and sure to accelerate our demise. It is also morally wrong. It is based on the premise that keeping others poor is justifiable to keep our wealth, on the concept that our life and that of our compatriots is more deserving than that of people from other nations. Why should this be the case? We are all human beings, with the same rights, the same aspirations. We should be leading the World in finding economic models which benefit all by improving wealth distribution and accelerating wealth generation. Not stepping out of the game and letting others take our wealth. Because they will. Globalisation will not stop, it will continue. Geopolitical wealth redistribution is beneficial to 6Bn people, even if a few hundred million backward thinking individuals in the West see it as negative. And 6Bn people will, in this modern age, prevail. We can join them, or we can watch from outside. That is the choice we have. And we are choosing the second option., at least in UK and US.