Towards a new world order?

Following the news this summer on Brexit and the U.S. presidential race, it seems we have reached a turning point in the course of world events, an incipient collapse of the Anglo-American paradigm that formed the basis of the post-World War II international order.

Although the mainstream media has largely presented events in the U.K. and U.S. as inexplicable or irrational, we feel they reasonably reflect societies where large segments of the population have been left behind in the process of pursuing rapid economic and social change.

Increasingly since the 1980s, a combination of mismatched economic ideas – globalized free trade and so-called “trickle-down” economics – has become political orthodoxy and shaped the Overton window for acceptable political discourse in many Western countries.

We are students of economics, and understand that, in theory, a country should achieve net gains from free trade. But that only happens if resources can move freely from industries that lose to industries that gain. If market failures prevent this, the state has a role in taxing the surplus benefits of the winners to facilitate this transition (e.g., investment in infrastructure, education and training).

Trickle-down economics prevents this from happening, by reducing taxes on the wealthiest members of society (the winners) based on the hypothesis that leaving money in the hands of the captains of industry leads to increased investment, economic growth and job creation.

The evidence for this is spotty, but it certainly does not work if this additional wealth is transferred instead into excessive consumption or flees the country to avoid any taxes whatsoever (see the Panama Papers).

Anecdotally, we observe the increasingly lavish lifestyles of the global super-elite – including the run-up of property prices in major markets that make living unaffordable for a shrinking middle class. The nexus of increasingly concentrated political and economic power and a corporate-owned media effectively determines an Overton window that is limited to policies that support these elites.

In other words, in the U.K. and the U.S., large segments of the population cannot readily play a valuable role in their economies, but the spectrum of political alternatives available to them in ostensible democracies does not address their needs.

At the same time, demographics have changed dramatically in most Western countries, with societies becoming more diverse and also embracing progressive policies with regard to race relations, gender rights, LGBTQ issues, etc. Societies that traditionally had strong national identities are increasingly pluralistic in practice (even if the prevailing narratives – e.g. the “American dream” of unlimited social mobility – don’t fully reflect this).

We have argued elsewhere that pluralism is somewhat inconsistent with the conventional notion of the nation state. People who have been socialized into a national narrative that created a tribal loyalty now find that narrative increasingly undermined by day-to-day reality. When this happens during a time of diminishing economic prospects, it is reasonable that such people see the increasing space given to other demographic groups and values as having been achieved at their expense.

As long as the economic paradigm of globalized free trade and regressive taxation remains the international norm, wealth may continue to concentrate in the hands of elites that have a decreasing sense of connection with (and accountability to) a society that continues to reflect less cosmopolitan values.

Singapore provides an interesting counterpoint to this. Decades of economic growth have created a strong concentration of wealth among a highly cosmopolitan elite that is comfortable in any world city. But at the same time, the vast majority of the population – the so-called “Heartlanders” – are more conservative, continuing to embrace traditional values.

In terms of social change, the government has seemed consistently aware that, since its nationhood began in a position of demographic pluralism among ethnic Chinese, Malays and Indians, the national narrative was somewhat fragile at the outset, and unity required ongoing attention. As a result, the state has resisted social change that could create further divisions within society.

Singaporean society has become more open in the past twenty years, but in many cases this is not due to changes in laws that previously supported a high level of government control, but rather to an either explicit or implicit change in the willingness to enforce those laws.

During the period leading up to and subsequent to the 2015 general elections, when faced with a choice between policies to facilitate Singapore’s ongoing development as a world city and policies to respond to concerns about change raised by Heartlanders, the government chose to embrace the latter – implementing restrictions on foreign property ownership and tightening up the process of importing foreign labor and expertise.

We are not saying that Singapore offers an alternative paradigm to envision the potential new world order. Considerable ambiguity remains with regard to what rights and freedoms its citizens actually have. But Singapore has maintained a remarkable degree of cohesion in a pluralistic society – and that is no easy task.

Note: Joseph P. Overton, former vice-president of the Mackinac Center for Public Policy, posited that within society, at any given time, there exists a range of ideas which are acceptable to the public. The success of a policy option, therefore, depends on whether it falls into that window, which to some extent is reflected (or determined) by the range of opinions expressed in mainstream media.