What’s at stake when arguments like Trump’s, which lack basic economic understanding, succeed?
Approximately 28 years ago, Francis Fukuyama published his influential essay ‘The End of History?’ in The National Interest. He argues that, having defeated the horrors of fascism and communism in the 20th century, Western Liberalism had won the battle of ideas. The long–term trend would be towards the Western conception of political economy from that point on. Obviously this process would not be smooth, and would take time; economic liberalism would come first (as in China or Singapore) and political liberalism would follow inevitably. He also notes, quite presciently, the biggest challengers to this process as being nationalism and the political application of religion.
Now, Fukuyama gets a lot of things wrong, and this is no endorsement (nor is it a critique) of his ideas, but let us indulge in the exercise of framing 2016’s political upheavals in his argument. This is because both political and economic liberalism have come under serious threat for the first time since 1989.
Many would, and do, disagree with me on this point. Brexit, they say, was the ultimate example of the strength of British democracy, and May’s vision of a ‘Global Britain’ will be the liberal vindication of their arguments. Trump’s victory saw fewer liberals cheering, but nevertheless the case was made that he was a sorely-needed shock to a system which had grown decadent, the personification of which was Hillary Clinton.
It is difficult to see how the election of America’s most protectionist President since the 1930s, a man with a widely demonstrated indifference (if not contempt) towards democratic norms is anything liberals should be cheering on. Similarly, the UK’s impending departure from the world’s most significant liberal economic and political union – decided by a referendum won with markedly different arguments than the liberal ones presented by Daniel Hannan et al – is no cause for celebration. Anti-globalist, anti-liberal populists are winning votes. From Wilders’ PVV in the Netherlands, to Le Pen’s FN and Germany’s AfD, liberalism is under siege in the heart of Europe.
Both President Trump and Prime Minister May have signalled future restrictions on immigration – the case against such policies have been made time and time again. As this piece is being written, protests are being held worldwide against President Trump’s decision to suspend admission to the US for refugees and people from seven (predominantly Muslim) countries. ‘The Wall’ will come, and ‘Mexico will pay for it’.
Except that they won’t.
If, as Trump says, Mexico will ‘pay’ by means of a 20% import tariff (the legality of which is still in question) then really Trump will needlessly engage in a trade war with America’s third-largest trading partner. US consumers will pay, and supply-chains across the border will be distorted, the price of which will be felt in job losses on both sides of the wall, and increased product costs. As a US Congressman said, this proposal is the ‘most expensive and least efficient’ solution to the issue of illegal immigration.
More importantly, by rejecting the America-built international order, typified by his intention on renegotiating NAFTA and pulling out from the Paris Climate Agreement, as well as his withdrawal from TPP (among many other things), Trump is putting up barriers to the propagation of western-style liberalism abroad. If the source and champion of liberalism in the last 70 years is starting to question the project, then we should be hesitant about liberalism’s future prospects.
Which would be a pity. (Neo-)liberalism works, and it’s curious that it has become a slur. One only has to look at the work done by Dr.Max Roser and his team at the University of Oxford:
Extreme poverty and child mortality down, levels of basic education, vaccination and literacy rates as well as the number of democracies are all up. Whilst it’s not demonstrated in this infographic, global inequality is falling. Hans Rosling (from the Gapminder project) has spoken and written about how ignorant we actually are about the world. We’re simply not aware of how much better the world has become.
The counter-argument is forming: ‘OK, the world has become much better, but how do we know that this is solely due to liberalism, and not due to social-democracy, the welfare state and international cooperation? Surely the Chinese example is not something western-liberals should be cheering?’
The Chinese example is perfect because it is so incredibly clear that its success coincides with the liberal reforms initiated under Deng Xiaoping in 1978. Hong Kong, its most prosperous part, is coincidentally also its most liberal. One can only wonder what further liberalisation will do for the country and its people. This in turn goes some way to addressing the first point. One must, however, concede some ground on this matter. It seems quite probable that social democracy and the welfare state explain the rise in living standards for some European countries. On the other hand, one can argue that these expenditures also set Europe up for a sovereign debt crisis. It’s similarly likely that international cooperation has helped (notably in regions struck by disasters). But the regions where the gains have been most profound – China, the Asian Tigers, the former East-Bloc – have undoubtedly seen their wealth coincide with their liberalisation.
By rejecting neoliberalism, the ‘Washington Consensus’ policies responsible for these incredible successes, in what can only be described as a bizarre lack of understanding of the basics of economics, nationalistic populists threaten a world-order which has given us so much.
That’s not to say that (neo-)liberalism is perfect. It’s simply better than the alternatives. We should not be so naïve as to forget the lessons of the ‘Great Recession’ and the (ongoing) Eurozone sovereign debt crisis. More broadly, we should not dismiss people’s concerns about globalisation.
The saying goes that ‘the price of eternal liberty is constant vigilance’. We must be vigilant towards two things:
- The external threats to liberty. Those that champion ideals which directly undermine liberalism, such as the protectionists and the nationalists.
- The internal threats to liberty. Liberalism is not perfect, and we should constantly look to improve upon it. This means recognising that government intervention can be positive.
It seems that Fukuyama may have been a bit early in declaring the battle of ideas over. It’s true that there does not seem to be an apparent alternative. There exist no ‘Eastern ideas’ in the way we do understand ‘Western values’, for example. And unlike in the 20th century, there’s no communism or fascism challenging the intellectual superiority of liberalism. But that does not mean we should be careless. Those who wish to undermine liberalism needn’t offer an alternative, merely distort the narrative which takes pride in liberalism’s success. In the times we’re living in, liberals should thus go out and make the positive case for liberty.
Florian Keulers is a former intern of the IEA and currently studies Political Economy at King’s College London
As with all IEA publications, the views expressed are those of the authors and not those of the Institute (which has no corporate view), its managing trustees, Academic Advisory Council or senior staff