Dec 29, 2015

Battered, bruised and jumpy — the whole world is on edge - FT.com

Daniel Pudles illustration

©Daniel Pudles
I

n 2015, a sense of unease and foreboding seemed to settle on all the world’s major power centres. From Beijing to Washington, Berlin to Brasília, Moscow to Tokyo — governments, media and citizens were jumpy and embattled.
This kind of globalised anxiety is unusual. For the past 30 years and more, there has been at least one world power that was bullishly optimistic. In the late 1980s the Japanese were still enjoying a decades-long boom — and confidently buying up assets all over the world. In the 1990s America basked in victory in the cold war and a long economic expansion. In the early 2000s the EU was in a buoyant mood, launching a single currency and nearly doubling its membership. And for most of the past decade, the growing political and economic power of China has inspired respect all over the world.
Yet at the moment all the big players seem uncertain — even fearful. 

The only partial exception that I came across this year was India, where the business and political elite still seemed buoyed by the reformist zeal of prime minister Narendra Modi.

By contrast, in Japan, faith is fading that the radical reforms, known as Abenomics, can truly break the country’s cycle of debt and deflation. Japanese anxiety is fed by continuing tensions with China.

 However, my main impression from a visit to China, early in the year, is that this too is a country that feels much less stable than it did even a couple of years ago. The era when the government effortlessly delivered growth of 8 per cent or more a year is over. Concerns about domestic financial stability are mounting, as the upheavals in the Shanghai stock exchange over the summer revealed.

However, the main source of anxiety is political. President Xi Jinping’s leadership is more dynamic but also less predictable than that of his predecessors. Fear is spreading among officials and business people, who are scared of being caught up in an anti-corruption drive that has led to the arrest of more than 100,000 people.

The slowing of the Chinese economy has had global ramifications. 

When China was fuelling a commodities boom, Brazil was pulled along like a water-skier attached to a speedboat. This year, though, the Brazilian economy sank beneath the waves, contracting by 4.5 per cent. President Dilma Rousseff has been caught up in a corruption scandal amid attempts to impeach her.
The mood in Europe is also bleak. The year was framed by two bloody terrorist attacks in Paris. The economic crisis that has bedevilled the continent for several years threatened to come to a head in July, as Greece teetered on the edge of expulsion from the eurozone. 

Meanwhile,Germany — which has stood out as a beacon of political and economic strength — is now struggling to cope with the arrival of more than 1m refugees, mostly fleeing conflict in the Middle East. The euro had already created divides between Germany and the nations of southern Europe, and the refugee crisis has driven a wedge between it and countries to the east. Meanwhile, Britain is threatening to leave the EU and French voters are turning to the far-right in ever greater numbers.
If you judge by the economic figures, the US should be an exception to all this gloom. The country is in the sixth year of an economic expansion. Unemployment is about 5 per cent. 

The US dominates the internet economy. And yet the public mood is sour. The prospect that the Republicans, one of America’s two great political parties, might genuinely nominate Donald Trump, a boorish demagogue, as its candidate for the presidency, does not suggest that the US is at ease with itself. Indeed, Mr Trump’s entire campaign — and that of his main rivals for the GOP nomination — is based around the idea that America is in dangerous decline. Beyond these local factors, are there common elements behind this global unease? Clearly, the world economy has not fully recovered from the financial crisis. There is also a widespread fear that, after years of highly unorthodox monetary policy, another financial or economic crisis might be building.

On the political and security front, the implosion of the Middle East continues. Outside powers have proved unable to restore order to the region and are finding that disorder is spreading to Africa and Europe, in the form of refugees and jihadi terrorism.

The biggest common factor is also the hardest to pin down — a bubbling anti-elite sentiment, combining anxiety about inequality and rage about corruption that is visible in countries as different as France, Brazil, China and the US.

In America and Europe, such complaints are often linked to a pervasive narrative of national decline. These social and economic anxieties have political side effects, fuelling a demand for “strong” leaders, such as Mr Xi, Mr Trump or Vladimir Putin of Russia, who promise (however hypocritically) to tackle the corrupt elites, fight for the little guy and stand up for the nation.

The global gloom makes the international political system feel like a patient that is still struggling to recover from a severe illness which began with the financial crisis of 2008. If there are no further bad shocks, recovery should proceed gradually and the worst political symptoms may fade. The patient is vulnerable, however. Another severe shock, such as a major terrorist attack or a serious economic downturn, could spell real trouble.

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