A fortnight ago, markets were going great guns, with the S&P500 hitting a record high, even as there was increasing evidence that global trade and many economies were slowing. Last week the markets took a sharp turn as the White House tweeted that tariffs would once again be escalated for US-China trade. With North Korea again testing missiles, Iranian tensions rising and US politics becoming more divisive by the day, what is going on?

People like to have simple stories to explain all this complexity. Harvard professor Dani Rodrik has a simple, inescapable Global Trilemma between democracy, national sovereignty and globalization. You can have two out of the three, but not all three. Since Donald Trump’s America First policy, globalization has been in retreat and democracy is now at stake.

Is democracy in retreat?

Since Freedom House began to track “electoral democracies” using the UN adopted Universal Declaration of Human Rights as the benchmark from 1990 to 2005, these grew from 76 to 119. But the latest February 2019 covering 195 countries and 14 territories showed that their index has declined for 13 consecutive years. Between 2005 and 2018, the share of “not free” countries rose to 26 percent, while the share of “free” countries declined to 44 percent.

Not all is bad news. Ethiopia, Malaysia, Armenia and Angola showed electoral improvements in 2018, but 13 countries, almost all in the Middle East, Sub-Saharan Africa and central Asia except North Korea, continued to perform worst in the Freedom House scoring.

This decline was explained by Freedom House as a reversal from the euphoric expansion after the fall of the Berlin Wall in 1989, but since then, many countries have not been able to deliver the economic stability and social security that underpin democracy. True, quite a few have suffered from natural disasters, climate change, corruption or stresses from human migration. Fragile states with deep-seated class or ethnic conflicts are particularly vulnerable to swings back to strong leadership with authoritarian tendencies.

Of the 41 countries that were consistently ranked “free” from 1985 to 2005, slightly more than half or 22 have registered net score declines in the last five years. The US, for example, has a score of 86, a drop from 94 in 2009. This decline is attributed partly to the growing inequality in the country and the loss of relative real income for the white middle class, but is also due to the frustration of citizens who feel that “big money in politics, racism and discrimination, and the inability of government to get things done” were contributing to more and more divisiveness in society.

Of course, the rankings and criteria used are not without controversy. Singapore, one of the best performing economies in the world, has a score of around 50, which ranks it behind Mozambique, and just above Nigeria. The United States ranks behind Greece and is slightly better than Croatia, Argentina and Panama.

What is notable is the growing economic strength of the “not free” category of countries from a share of 12 percent of global income in 1990 to 33 percent now and growing. Freedom House acknowledged that “China’s rise is the most stunning, with GDP per capita increasing by 16 times from 1990 to 2017.”

What happens in the United States would be a litmus test for electoral democracy across the world. This is because her president likes to call the media “fake news,” questioning the impartiality of the judiciary and the law enforcement agencies. The US executive is currently engaged in a critical power struggle over the checks and balances by the legislature and judiciary, as written in the US Constitution.

This US test of the rule of law and institutional checks and balances have important lessons for Asia. The Asia lesson so far is that when disagreeing politicians push the judiciary to make what are essentially political decisions, the rule of law suffers because the judiciary sooner or later become politicized. Furthermore, if electoral politics are not able to get on with the job of delivering better jobs, income and security for the population, then the business community will usually side with those leaders who promise law and order.

Essentially, the 2007 global financial crisis morphed into economic malaise and 10 years later became a full-fledged political crisis. Indeed, the ills of America are increasingly being blamed on foreigners, immigrants and outsiders, so America First is essentially an inward shift in outlook and a retreat from the second leg of American exceptionalism, which was the ideology that America would bring electoral democracy and her values to the rest of the world.

Steve Bannon’s recent op-ed that the US is in an economic war with China is a political diversion that benefits only the armaments industry and market short-sellers. Most retail investors simply feel helpless when their wealth evaporate on more talks of war.

Other American experts, such as Michigan professor Ronald Inglehart think that “today’s retreat (in democracy) will be reversed only if rich countries address the growing inequality of recent decades and manage the transition to the automated economy.”

True, the disruption in technology from social media and job losses are important reasons for the swing towards protectionist populism. But both Bannon and Inglehart forget about another existential threat -- global warming.

The rich (and most rich country experts) tend to have a blind spot about global warming because this has been the “slow burn” problem that affects the rich less than the poor countries. But as forest fires destroy rich homes in California and freak hurricanes affect Florida and Puerto Rico, there is growing awareness that the six hottest years in recorded history will begin to affect us all.

Will an economic war between the two largest economies in the world solve unemployment, inequality and the looming global warming disasters?

No. War of any kind will only worsen all the current problems and allow the suspensions of more and more freedoms in the name of conducting war.

The climate kids protesting in London last week got their priorities right, arguing that politicians should focus on the common threat of climate and social change, rather than squabbling on endless politicking with little concrete results.

It is no coincidence that temperatures are rising around the world, both physical and emotional. Hot rhetoric can only lead to conflicts. What we need are cool heads and warm hearts, not another road to serfdom.


Andrew Sheng
Andrew Sheng writes on global issues from an Asian perspective. -- Ed.

(Asia News Network)