The West Is Losing Faith in Its Own Future

Gideon Rachman, Financial Times, December 9, 2013

What defines the west? American and European politicians like to talk about values and institutions. But for billions of people around the world, the crucial point is simpler and easier to grasp. The west is the part of the world where even ordinary people live comfortably. That is the dream that makes illegal immigrants risk their lives, trying to get into Europe or the US.

Yet, even though the lure of the west remains intense, the western world itself is losing faith in its future. Last week Barack Obama gave one of the bleakest speeches of his presidency. In unsparing terms, the US president chronicled the increasing inequality and declining social mobility that, he says, “pose a fundamental threat to the American dream, our way of life and what we stand for around the world”.

A Pew Research Center opinion survey, conducted in 39 countries this spring, asked: “Will children in your country be better off than their parents?” Only 33 per cent of Americans believed their children would live better, while 62 per cent said they would live worse. Europeans were even gloomier. Just 28 per cent of Germans, 17 per cent of Brits, 14 per cent of Italians and 9 per cent of French thought their children would be better off than previous generations. This western pessimism contrasts strongly with optimism in the developing world: 82 per cent of Chinese, 59 per cent of Indians and 65 per cent of Nigerians believe in a more prosperous future.

It would be nice to believe that talk of a decline in western living standards is simply hype. But, unfortunately, the numbers suggest that the public are on to something. According to researchers at the Brookings Institution, the wages of working-age men in the US–adjusted for inflation–have fallen by 19 per cent since 1970. {snip}

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There is a connection between the rising optimism in the developing world and the rising pessimism in the west. In his speech last week, Mr Obama remarked that “starting in the late 1970s, the social contract began to unravel”. Perhaps not coincidentally, it was also in the late 1970s that China began to open up.

Even defenders of globalisation now usually acknowledge that the emergence of a global labour force has helped hold down wages in the west. Some European friends of mine daydream that protectionism–or even a war in Asia–could send more well-paid jobs back to the west. But in reality, globalisation seems unlikely ever really to go into reverse, given the technological, economic and political forces pushing it forwards. It would certainly be morally dubious to attempt to bolster western living standards by undermining an economic trend that has dragged hundreds of millions of people out of poverty in the developing world.

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If the erosion of living standards continues, how will western voters react? There are already signs of political radicalisation–with the populist right on the rise in both the US and Europe. But, as yet, there is no real sign that the Tea Party in America or nationalist movements in Europe have a realistic shot at controlling the central government in a large nation. The consensus around globalisation also seems to be holding. {snip}

{snip} Another decade of western economic malaise–or, God forbid, another financial crisis–is likely to see more radical solutions and politicians emerging.

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