Currently, the largest economies of the world are in turmoil. The countries, spread across continents, are in constant churn, caught up in political and socio-economic waves that lash, thrash, crash, and mash endlessly. These pendulum-like vibrations have a domino effect on other nations that rock and roll on a non-stop roller-coaster ride
By Alam Srinivas
- Even in nations, where the two opposing political ideologies compete, the winds of change may favour the conservatives
- Britain, Italy and France are controlled by right-wingers, and there is a tussle between the right and left in Brazil
- Russia may slowly, but surely, grind to a halt, which may stoke civil and political dissensions
- China will face huge challenges, as Xi tries to battle slow growth, income inequalities, unemployment and frustrations of the middle class
The world is standing on its edge. Like a seemingly-stable equilateral triangle that’s poised on one of its three points. It is definitely going to topple, at some time or the other. We don’t know when or why. Simply because there are many strong forces, and several pulls and pushes acting on and across the globe. They come in various hues, contours, shapes and colours. They are political, economic or social in nature – most times a mix of factors across nations. The times are not merely changing – they are shattering and quaking furiously and fervently.
This is not the end of the world, as we have known for decades, at least two or three generations. This is not the end of history, as predicted by Francis Fukuyama almost 30 years ago, or the beginning of a new one. This is history standing on its head, not knowing what the future holds. This is the present grappling with the past, even prehistoric and ancient ones, in a bid to influence the future. These are versions of post-modernist histories, unique and varied in each nation, which grapple with part-romanticised, part-factual ancient narratives.
What is crucial is that the largest economies are in turmoil. Take a look at 10 of the top dozen nations (GDP figures as per an estimate), and they are in a state of extreme flux. They are in constant churn, caught up in political and socio-economic waves that lash, thrash, crash, and mash endlessly. The countries are spread across continents – the US in North America; Brazil in South America; Germany, France, Italy and the UK in Europe; Russia in Eurasia; and India, China and Japan in Asia. Obviously, these pendulum-like vibrations have a domino effect on other nations, which rock and roll on a non-stop roller-coaster ride.
Globally, the East (Russia and China) takes on the West (America and Europe), the latter confronts the East, and the South (India and Brazil) tries to find a balance. The tensions are palpable, their impact perceptible and frightening. It is not the clash of civilizations, and the remaking of the world order, as envisaged by Samuel Huntington. It is the crusades within civilizations, nations and communities. A million mutinies, as V S Naipaul wrote ages ago, not just in India, but across the leading economies. It’s a world on an ever-thinning precipice.
Don’t be alarmed. The journey is topsy-turvy, with its scary ups and downs, rattling teeth and bones, and numbed body and mind. But when it’s over – we don’t know when or how – and over it will be at some point in time, we will experience a thrill and exhilaration, coupled with a state of bliss, as a mix of Adrenalin, and pleasure-giving dopamine rush through us. We will witness alarming tragedies on the way. Many will suffer. The Pied Pipers will charmingly lead us to death, either literally or metaphorically. Survival will be random – ultimate Darwinism.
SHARP RIGHT TURNS
In some of the largest economies, strong men, or strong women, are in power and may remain there for a long time, even a lifetime. Vladimir Putin in Russia and Xi Jinping in China are prominent examples. While it seems almost impossible to dislodge the former, the latter, at the time of writing this piece, will possibly enjoy a third five-year term. India’s Narendra Modi will dominate the national elections in 2024. Britain, Italy and France are controlled by right-wingers, and there is a tussle between the right and left in Brazil in the forthcoming re-election.
Even in nations, where the two opposing political ideologies compete, the winds of change may favour the conservatives. In a recent poll in America, the majority felt that the Republican Party was more likely to bring future prosperity and growth, compared to the Democrats. Although they are still in the minority and dub themselves as nationalists, the far-right is on a political ascendant in Germany.
In some of the largest economies, strong men, or strong women, are in power and may remain there for a long time, even a lifetime. Vladimir Putin in Russia and Xi Jinping in China are prominent example
An expert defined this century’s radical conservative movement as the “normalisation of the far right”, which essentially implies its mainstreaming and mass acceptance. The right, as they contend, is the new political centre.
As these leaders acquire and internalise more power, their ambitions and desires cross territorial boundaries. They decide to grab the land mass of neighbouring nations, the theoretical and intellectual notions and justifications of which are rooted in semi-factual history. Russia’s invasion of Ukraine is an example; Putin publicly declares that there never was an independent Ukraine, which was always part of Russia. China feels the same about Taiwan and its influence over the South China Sea. In fact, Xi Jinping is willing to take on distant countries such as the US, Australia and Japan to expand territorial control.
Within the national arena, immigrants become irritants, like thorns embedded in the xenophobic soul. As jingoism and patriotism extend across sections, there are aggressive attempts to expel the ‘outsiders’ or ban their entry. America for Americans, Britain for the British, and India for the majority population become the major socio-political themes.
So, walls, physical and legal, are created at the borders – the US’ bid to plug the entry loopholes with Mexico, Britain’s exit from the European Union, and India’s efforts to enact new citizenship laws. There are, thus, both expansive and restrictive actions in motion.
Most of us, including global souls (as defined by travel writer Pico Iyer), forget that many nations are founded and grounded with immigrants. The population of America is from the outside. India saw an influx not just in the past 1,500 years, but over 5,000-6,000 years, including the coming of Aryans. If the cut-off lines to pinpoint immigrants are shifted further, only a few insiders are left. An internal schism is inevitable, even as we strive to eject the outsiders. We can see the severe ramifications, as Tamilians claim Tamil Nadu and Marathis Maharashtra.
SCARY LEFT TURNS
Obviously, external and internal conflicts undermine the economies and weaken their underlying foundations. As growth peters out, work opportunities diminish, and wealth disparity goes up, economic crises grip the nations. This is happening in the 10 economies we mentioned earlier. Russia will witness de-growth this year, and possibly the next one. India and China will definitely undergo slower growth rates in the near future. Europe and America may be hit hard, as will be the case with Japan. Global constriction, if not recession, is on the cards.
Such calamities play out in extreme ways. In one scenario, they arm the rightists with social and political weapons to energise their supporters and destabilise and demoralise their centrist and leftist opponents. This is how Donald Trump triumphed in the US, despite all odds. This explains why there were unprecedented regime changes in Britain, France and Italy. The same can happen in Brazil. It is true for India too; Modi’s rise to power was dictated by deep economic troubles. The economy becomes the staircase to reach the pinnacles of political power.
Economies were caught in the tentacles of low-growth, high-inflation periods. This implies that most citizens earn less, spend more, and witness huge wealth disparities. The rich become richer, the poor poorer, and the middle classes are decimated
At the same time, if certain leaders and governments remain in power for a longer time, economic emergencies decouple GDP growth from politics. As the strongmen and women exercise enormous might and authority over society and institutions, they silence the opposition. No one, or few, dares to question their moves and motives. Putin manages to retain control despite Russia’s economic troubles. So does Xi despite slower growth in China.
Incumbents continue to win national and state elections in India without worrying about the economy. In fact, the disasters lull the public and turn them into social zombies. Over the past 30 months, since the advent of the Covid pandemic, the world’s largest economies have suffered the most. Surprisingly, they recovered the fastest with record growth rates. A part of this was due to the base effect – the percentage increases were on lower GDP bases due to negative growths in 2020. But now, these economies, as well as the rest of the world, are caught in unintended consequences of the decisions they took to fight the viral epidemic. Such situations, as stated earlier, can provide more fodder for leaders with extreme views and ideologies.
Covid forced policymakers across the world to loosen purse strings, and central banks to go soft on policies. Public expenditure on welfare schemes shot up, as citizens went hungry, lost jobs, saw incomes dwindle, and grappled with healthcare costs.
This led to huge budget deficits, as nations printed money to finance welfare, even as official revenues shrunk. Central banks kept interest rates low and forced banks to lend freely to businesses and individuals. The end result: too much money in the system drove up the prices of assets (stocks and real estate), and pushed inflation to unimaginable levels.
Experts contend that the global inflation rate is almost 10%; in developed nations, the figures are lower but 4-5 times above pre-Covid levels. Policymakers scamper around to lower price rises, which have immense political, economic and social connotations. Incumbent governments have lost elections over the prices of bread and onion. People have protested on the streets. Economies were caught in the tentacles of low-growth, high-inflation periods. This implies that most citizens earn less, spend more, and witness huge wealth disparities. The rich become richer, the poor poorer, and the middle classes are decimated.
Central banks, therefore, have now hiked interest rates and will continue to do so. This pushes up the costs of doing business, which impacts profitability and jobs. Asset prices, especially stocks, can be nosedive, as they have globally in the recent past. In the past, the policymakers helped the central banks, as the former balanced the fiscal deficits to reduce the money flow in the system. A combination does result in stability, as prices stabilise, even come down, and demand surges, which helps the economies to take off. The growth cycle comes back.
However, this time may be different. Nations are used to expansive welfare schemes, and leaders are confident that this is the way to sway the masses and remain in power. Citizens are used to doles and subsidies and may feel angry if they are snatched away. Businesses are comfortable with the tax breaks they got from the right-wingers. So, what happens if the finance ministers let matters be, and don’t take measures to balance their budgets? What will be the result if tough monetary policies, i.e. interest rates, are married to benign fiscal ones, i.e. ongoing expenses on welfare schemes? A global economic epidemic!
TOO MANY U-TURNS
It’s a combustible mix – wars, immigration issues and economic crises – and can lead to violent volcanic eruptions within societies. We have seen them in the recent past. In the United States, Trump’s supporters marched to the White House to wrest control. In China, thousands of aspiring homeowners came on the streets and refused their monthly instalments on mortgages. India is wracked with discords and disputes between states, sections, and communities. Britain, Germany, France, Italy and Brazil are divided, as individuals take radical positions. Tens of thousands have fled Russia, especially after it declared war against Ukraine.
These trends can intensify in the future. Over the next few months, as winter grips most nations, there can be shortages of energy and food in Europe due to the Russia-Ukraine factors. Russia may slowly, but surely, grind to a halt, which may stoke civil and political dissensions. China will face huge challenges, as Xi tries to battle slow growth, income inequalities, unemployment, and frustrations of the middle class and poor sections. If inflation remains high, the economy tumbles, and the rupee plummets against the dollar, imports will become expensive, and foreign earnings plunge to unheard-of depths. Japan will flounder.
Only pragmatic policies and decisions can help. But practicalities may take a backseat in Russia, China, and possibly India. Europe and North America will be caught between the necessity and desperation to save Ukraine, and counter Russia, as also limit China’s ambitions. The various leaders will aim to retain power, capture it as they tussle with local opposition, and attain global goals. Putin has announced that he will use nuclear weapons if required. Climate Change effects will intensify if we don’t react now. Ours is the first generation, and hopefully not the last, which can destroy the planet. Will we?