The Answer That Will Rule The World

I believe we are living in the midst of a very important shift in global affairs. However, as is often the case, I am not altogether clear how we are shifting and where we are shifting to.

It is fashionable to postulate and fantasize about tectonic changes in the balance of power and influence among the nations of the world. However, that confuses the effect for the causes. And confuses the boundaries of sovereign states and governments for actual boundaries of power.

If we look back at the last quarter of the 20th century, it was marked with the ascendence of a few central ideas: capitalism, global markets and the mass consumer society. May be we should call it the global consumption consensus. The intellectual underpinning - if we can characterise it as such - is founded on the notion of property and economic rights of the individual and that such rights to make and spend money should be as unconstrained as possible by national boundaries - and within those boundaries, by the interference of others.

In this consensus, progress is measured by growth in GDP. Why is growing GDP supposed to be good? Nobody knows? But we only know that if more wealth is created all the time everyone (still) has the chance to grow rich even when they are not.

The main driving force behind the rise of the global consumption consensus was America. No, not the power of the US government or the military. This is the soft power from the appeals on the world's masses of American-style properity, lifestyle, technology, meritocracy and freedom to fulfil one's dreams. Whether all that is true, I do not know for sure. But for sure, the allure and the attraction of the whole idea of a freer, fairer, wealthier, more modern and more comfortable society is one that proved to be the most powerful force that shaped the world.

The second most ardent subscriber of these ideas has been China. It was American consumption that kept China growing and it was the capacity of China to deliver more-and-more at less-and-less cost (this refers to both goods or capital) that kept America going especially since the last decades of the 20th century. In economic freedom (and US-led culture of consumption), China found an ally to keep it growing, modernise its society and to slow the demand for other forms of individual freedoms. China also found that its central position in the global market proved useful in broadening its influence throughout the world. As an investor of capital, consumer of raw materials and supplier of manufactured goods China developed tremendous prestige and influence in the developing world. If America supplied the dream of the modern consumer society to the masses, China brought billions of people closer to realising it - and doing so cheaper than ever.

The rest of the world subscribed to largely the very same ideas. The only difference has been a matter of timing or degree. Western Europe liked to label it the Anglo-Saxon approach but it found ready adherents by countries in Europe's periphery: within the British Isles, in the Baltics and amongst the newer members of the EU. Much of East Asia found itself part of the global supply chain to this consumer economy and (like China) eager to keep the golden goose going. India, Russia and Latin America came to the party later and with much ideological apprehension but they too found it advantageous to buy into a world of capitalism, global markets and mass consumption.

The way I see it, this current economic crisis marks the end of the global consumption consensus. This is the tectonic change I was talking about. What is not clear however, is what will replace it as an idea that is so alluring and attractive that societies, economies and political forces will reshape themselves around this new idea. This is why a new global leadership is needed; and needed more than ever since the 1930s. Because there is no lack of dangerous and divisive ideas - mostly backward ideas centered on religion, race or national identity - lurking about in its stead.


The consumption consensus will not go down without a fight. Ironically, its biggest defenders will be those that depended on it the most i.e. China and East Asia. In any religion, the new converts after all tend to be the most fervent. It may yet happen, but right now one do not see the emergence of new ideas that will lead the world from the mercantilist economies of East Asia. If anything, the powers there are more reactionary and interested in the status quo. China would be tempted out of short-term self-interest to step into the hot seat as the driver for global consumption, but the scale of America's profligacy will be hard to match. It is much harder - not to mention foolish - for China to grow by spending its own money on consumption which ultimately destroys rather than create value. After all, consumption unlike investment does not carry a rate of return.


So there is no turning back.


In the ageing societies of Europe and Japan, they are turning their back on the constant need for growth. Yes, they have more social issues to take care of as society ages but they also realise that they will have trouble keeping up. But that is no use for the rest of the world. When developed societies turn their back on the world and tend only to their parochial concerns, what hope is there for the rest of world for those who want to better themselves?

So turning inwards and leaving everyone to their own devices cannot be a viable way forward.

But - sigh! - what about America? It is almost clear that America is more than ready to move on from the grand bargain that sustained the global consumption consensus; if only because now it is dawning on the fact that it can no longer afford to sustain a fantasy lifestyle of limitless consumption. That was the grand bargain that began during the reconstruction after World War II and during the Cold War, in that in return for re-establishing the primacy of capitalism and free-market system (and American power), America would basically underwrite the world's security umbrella (vs communism) and fund everyone's progress towards economic prosperity. After the Cold War, the security umbrella and American-primacy part became optional, hence opening the door for the likes of China, India, Russia and Brazil into the feast. That grand bargain served Western Europe, Japan and East Asia very well; and played a large part in one of the greatest worldwide uplifting of the quality of life in the human history. We often forget that as little as 50 or 100 years ago in most parts of the world (even in peacetime) most people lived in conditions that would be considered horrific by today's standards. But that grand bargain is coming to an end.

Just like what they say about China: everyone can moan about China being too powerful until the day when China gets weak and people will miss the powerful China. The same can be said about America, that the world might have good reasons to miss having a powerful America that foolishly pays everyone's bills without realising its detriment.

What will be the new grand bargain? No body knows.

What will be the next unifying ideal for the world? No body knows.

Where will it come from? No body knows.

The one that comes closest to an answer will be the global leader of the 21st century.