Governments and some observers are not shy to express a breath of relief as in the more recent period rarely they have seen such positive economic signs auguring a brighter future. An economic revival appears be taking shape and perspective. It is surely backed by a surprising rise in prices across a range of assets in the stock market. At first glance, these upturns, which make up the brighter side of the coin, may offer a seemingly solid threshold of invulnerability against the many things that other analysts see going wrong and that threaten, if materialized, to render short-lived the hopes of a sustainable and job-creating recovery.
But what are the risks constituting the darker side of the coin? Among global issues, one can recall the persistent trade tiffs, which may stir a new wave of protectionist feelings. Just around the corner lies in ambush a rocketing debt in many Chinese provinces, which most likely is prelude to a credit squeeze by the central authorities. This shift, analysts contend, will have a negative impact on world trade. But what is more, and what worries most the observers, is a geopolitical swing towards the worse. One can signal as meaningful example the quagmire in the Middle East, with the disquieting worsening of the Sunni-Shia divide, and the nuclear risks in Southeast Asia.
As to the state of economic health, it is worth mentioning UNCTAD’s report for 2017, which sheds a different light on the economic upturn by emphasizing the strong asymmetry characterizing the wealth growth. The most striking comment made in the preface by the organization’s Secretary General, Mukhisa Kituyi, is a warning on the quality of the recovery, suggesting that “we are still in a world of profit without prosperity, a situation which contributes very much to the rise of income inequalities”. And once again the big corporations are put on the dock, reminding us of Nobel Prize-winning economist Joseph Stiglitz’s denunciation of the capitalist drift, which he formulated in his French written work of 2010, “Le Triomphe de la Cupidité”.
A strongly uneven distribution of the global wealth is also underlined by the Credit Suisse Research Institute’s report on the subject. Actually, the analysis points out that the ranks of the rich expanded further, with 2.3 million new millionaires added to the total in the twelve months preceding June 2017. The report also emphasizes the sharp divide between the wealthy and the rest, with the top 1 percent owning more than half of the total global wealth.
Unimpeded capital flow should be a boon, and, in fact, for a long time the liberal orthodoxy was against any kind of restrictions on cross-border finance. But a succession of financial calamities in Latin America and in East Asia have prompted a rethink. In a paper published in early 2016, three IMF analysts provided substantial evidence to show the trouble that uncontrolled short-term capital can cause, somewhat contradicting the official policy of the institution, which seems to ignore the issue despite the brilliant speeches periodically released by IMF President Christine Lagarde.
It should not therefore sound as a surprise that capital mobility, together with free trade and immigration, is becoming a target for popular anger, which appears to be the main reason for the political fragmentation in Europe, a problem that is causing now a headache to the usually unmoved Chancellor Angela Merkel. Actually most of the 14 percent of the votes collectively lost by the grand coalition of CDU/CSU with the SPD went to the right-of-center parties, including the populist Alternative for Germany.
The likely risk, then, is that politics begin to be shaped gradually, and sometimes inadvertently, on the basis of the requests or expectations of populist movements. According to experts, this is what has been happening in Great Britain since the Brexiteers won the referendum. Hence the need for the ruling class to escape from the simplistic populist belief that society can be divided into two antagonistic classes – the “people”, on one side, and the strong powers or the establishment on the other, which, by the way, was the winning approach of Trump as a candidate and which turned out to be the main reason explaining his election to the White House.
The people, according to this belief, are presumed to have a single will, while the powerful as a whole are presumed to be devious and corrupt, determined mainly to feather their nests and adept at using intermediary institutions to frustrate the people, namely political parties, institutions, courts, and media companies. But in order to counter populist expectations, governments must have the ability to put forth credible politics of globalization that are part of public policies whose objective is either to forward or to obstruct individual transactions depending—in the absence of effective international institutions—on national interest.
Time may soon come when majority political parties should abandon hypocritical conventionalism, which they use often as a screen to hide their lack of vision or to hide their inability to put in motion effective mechanisms aimed at transforming political decisions into action.
As to the geopolitical front, the most acute disquiet focuses on the young Saudi crown prince Mohamed bin Salman, whose warped ambitions too often turn to haste. MBS, as people refer to him, so far has not earned a good record, as is proven by his ill-advised initiative to start a war in Yemen against the Houthis, a Shia militia, and his attempt to isolate Qatar with the result of wrecking the Gulf Cooperation Council and pushing the gas-rich neighbor towards the archenemy Iran.
Although much mystery still surrounds the circumstances of Saad Hariri’s initial televised resignation as Prime Minister of Lebanon, analysts do not have any doubt that the move was designed by MBS to create problems for Iran’s Shia regime. It would have been advisable for the leaders of the big powers who look ready to flank MBS to pressure Saudi Arabia to back down right away in order to not to repeat the bad outcome of his previous steps. Lebanon has very much suffered for having been the proxy battle ground of outside powers, and it has already paid too high a cost. The “temporary” hold on Saad Hariri’s resignation shows that common sense seems to prevail now, with, however, a new loss of face for the Saudi crown prince.
Western powers should urge restraint on Prince Mohamed’s inappropriate impulses. Cheering his purge without a process to determine who is guilty of what may encourage further confusion and even chaos. It would be wiser to counsel the Prince to act with caution. Above all, it is important to avoid escalation with Iran in order to not make unmanageable an already highly risky situation in the region.
Certainly, no one can realistically imagine a last-ditch intervention by the UN since it is widely recognized that, lacking a solid “entente” between Washington, Moscow, and Beijing, the UN cannot impose itself. Nor can one conceive of a good-offices initiative by the EU, given that as never before has Europe faced such an identity crisis, with division over migration, the future of the Euro zone, separatist movements, and demands of repatriation of important prerogatives to the national states.
All that puts humanity before a critical crossroads. Either Trump manages to get rid of the forces that so far have hampered him from providing shape and content to the “Grand Bargain” that he talked about at the beginning (likely meaning an agreement with Putin, Xi Jinping and Europe), or the Western world will run the risk of being gradually contaminated by a growing political decay pushing it into an uncharted path. As of now, world division into spheres of influence seems, in any case, the likely landing of the current world disorder, with the difference that if things are left to happen without a guiding arrangement for long, its acceptance as a mere state of fact will become sooner or later inevitable, and the world will come to know before that moment still more devastations, violent rioting, and harsh conflicts.