Nationalism and fascism are back (Source: here)
Nationalism and fascism precede and ultimately precipitate the Second World War, a conflict so vicious and traumatic that humanity finally wakes up to their true horrors. To ensure nationalism and fascism never blight the earth again, a collective effort is made to design a new global governance system. Implemented in 1944 and 1945, it centres on the United Nations, the World Bank, and the International Monetary Fund.
Unfortunately, the new institutions are quickly side-lined as Russia and the West become embroiled in an ideological struggle, which becomes known as the Cold War. Before long, the rest of the world is sucked into the conflict as well, which ends up lasting some forty-five years. During this long period, international relations are governed much more by the logic of the Cold War than by the newly-minted global governance system.
When the Cold War finally ends and the era of globalisation beckons, the world turns to the West for custodianship. Unfortunately, having won the Cold War the West proves incapable of winning the peace. After a series of setbacks, Western nations begin to turn inwards. Struggling to compete with China and surging emerging economies, the West increasingly comes to view the rest of the world as a hostile place, which undermines the livelihoods of its working poor. However, rather than address the underlying causes of its weakness, the West falls for nationalist and fascist rhetoric last observed in the run-up to the Second World War.
Nationalism and fascism have finally come full circle. This short essay explains in greater detail how this worrying development has come about.
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The Second World War is deeply traumatic. Europe and large parts of Asia are left in ruins. Some 70 to 85 million people die, another 40 to 60 million are displaced. As the war draws to a close after five years of bloodshed, the world resolves that conflicts as devastating as World War II must never happen again.
The means to achieve this noble goal is the establishment of a set of multilateral governance institutions centred around the United Nations, the International Monetary Fund, the World Bank, and the Global Agreement on Tariffs and Trade, which is destined eventually to become the World Trade Organisation. These institutions are specifically designed to resolve the type of problems that led to World War II, including geopolitical disputes, competitive devaluations, poverty, protectionism, and capital controls.
Casualties in World War II overshadowed anything that came before and since (Source: here)
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Unfortunately, cracks in the new global governance system appear almost immediately. The five permanent members of the UN Security Council – US, UK, France, China, and Russia – use their veto powers to serve their own interests, even to the point of blocking UN resolutions with very large majorities. Americans and Europeans also exploit their control of the World Bank and the International Monetary Fund to pursue political objectives in the developing world.
The main reason why the United Nations and the other global governance institutions get side-lined is that they are ill-suited to solve the new type of conflict that emerges after 1945, namely the Cold War. Even before the fighting of World War II has stopped, the Superpowers of Russia and the United States pursue radically different and competing models of economic and political development. After Hiroshima and Nagasaki, the Superpowers embark on an arms race, which sees each side build ever larger and more costly arsenals of nuclear weapons, which they point at each other. Throughout the Cold War, the threat of nuclear Armageddon looms over the world.
To most non-Superpower nations, especially in the developing world, the term ‘Cold War’ is a gross misnomer. The logic of the Cold War dictates that Superpowers do not face off directly, but rather skirmish in countless proxy wars throughout the developing world. With the exception of a small number of non-aligned nations, most African, Latin American, Eastern European, and Asian countries – numbering more than 150 in total – get sucked into hot conflicts. The Western Superpower secures allies in developing countries by plying ‘friendly’ dictators with guns and money, which allows despots to rule with near-impunity. The result is disastrous for the affected countries; they are left deeply divided, undemocratic, violent, corrupt, economically stagnant, and highly unstable.
Children conscripted to fight hot wars in the Cold War (Source: here)
Things are no better within the Eastern Block. The Soviet Union crushes all dissent and installs puppet governments. The Soviet economic system initially delivers improvements in living standards following the devastation of World War II, but soon proves deeply flawed. Command economies also prove unable to produce sufficient surpluses to keep up with arms race against the West. In 1989, the Soviet Block begins to disintegrate. By 1991, the Russian economy itself collapses, ending the Russian Communist Party’s monopoly on political power.
Erich Honecker and Leonid Brezhnev were very fond of each other (Source: here)
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As the Cold War gives way to the new era of globalisation, it seems for a time that the whole world finally sings from the same song sheet. China emerges as a major player in the post-Cold War reality. Unlike the Soviet Union, China has been able to transition from command economy to capitalism, while retaining its one-party political system. Specialising in investment and exports, China is able to grow rapidly in a new world of truly global markets. By 2024, the Chinese economy has become the largest in the world in purchasing power parity terms (see here).
Globalisation also hugely beneficial for other developing countries, which are finally left to run their own affairs. Without superpower support, the dictators find themselves unable to hold on to power. A blossoming of democracy takes place across developing countries, including most countries in Africa, Latin America, Eastern Europe, and Asia.
Democracy turns out to be particularly good for the poorest. Democracy in countries with many very poor people tends to lead to governments that pursue quite conservative macroeconomic policies, which is precisely what poor countries need in order to grow. The logic is simple and powerful: Any politician who wishes to be elected or re-elected in a country with larger numbers of poor people has to respect their wishes. By dint of living at or close to the poverty line, without access to social security, the poor are highly economically vulnerable, so they tend to vote for politicians who prioritise stability and growth over all other policies.
Bowing to this political logic, elected officials across large numbers of poor countries adopt strongly pro-growth policies, including inflation targeting, better fiscal policies, flexible exchange rates, debt reduction, and foreign exchange reserve accumulation. Many developing countries also build pension systems for the first time, which enables them to develop local bond markets and hence the ability to self-finance. Government yield curves in turn enable corporates to issue bonds for the first time, improving private investment.
The era of globalisation ushers in strong economic convergence (Source: here)
In short, the absence of foreign interference allows poor countries to realise their inherent potential to catch up with rich economies, a process known as economic convergence. Between 1989 and 2008, the global economy thus experiences a boom led by emerging economies. This period witnesses the largest improvement in welfare in human history as more people are lifted out of poverty than ever before. Aided by their strong economic performances, many developing countries become sufficiently powerful to defend their own interests for the first time, ensuring the neo-Colonial controls that were once exercised by rich countries over poor countries, especially during Colonialims and the Cold War, can never return.
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Unfortunately, globalisation, just like the Cold War before it, turns out to be yet a transitory state. The path to freedom and prosperity is challenged from two directions, one within developing countries, one from within rich nations.
Economic and political elites in many developing countries successfully manage to torpedo attempts to dismantle their rent-seeking privileges and patrimonialism (systems of government in which all power flows directly from them). While the situation in most emerging economies is stll much better than during the Cold War, it is nevertheless the case that many developing countries struggle to fully realise their potential due to near-constant rear-guard actions from entrenched domestic elites.
Even more importantly, trouble is brewing within Western economies as they start to feel the pinch of competition from emerging economies. Aided by their newly-found stability and growth, emerging economies have proven themselves capable of attracting investment from rich countries, which has resulted in the relocation of entire industries from to Asia and other parts of the developing world. This exodus of jobs and investment puts downwards pressure on the wages of low-income workers in the West, with the poorest-educated faring particularly badly.
Immigration during this period – mainly consisting of Eastern Europeans in Western Europe and Asians and Latin Americans in the United States – also impacts low-paid workers adversely, not least because discerning employers soon realise that immigrants work harder and are more motivated. Some even have better skills than local workers.
To add insult to injury, income inequality rises sharply within rich countries. After all, not everyone in wealthy economies are adversely affected by globalisation. Highly educated Europeans and Americans continue to do extremely well, because they don’t face competition from abroad.
However, the really big winners are high-profile tech billionaires, whose wealth is allowed to become so obscene that it contributes visibly to a rise in income inequality in rich economies. In other words, the working poor are not just falling behind globally, but also inside their own countries.
US income inequality rises sharply during the era of globalisation (Source: here)
It is important to stress that greater immigration, relocation of businesses to emerging economies, and the rise of tech billionaires are not the cause of declining living standards of the working poor in rich economies. Rather, they are merely different manifestations of a natural process of economic development, which is continuous and always produces winners and losers. The best way to respond to the resulting polarisation is not to fight change itself, but to invest to help losers quickly regain fitness.
But this does not happen.
Instead, for years, politicians in rich countries pursue policies of neglect towards the working poor. Hell-bent on cutting taxes for the middle class and business, they cut public spending and put off investing in the poor in the hope that rising stock markets will somehow lift all boats. The same naïve logic underpins decisions not to curb the monopolistic excesses of the tech monopolies, even though perfectly suitable anti-trust legislation is available for this purpose.
Then, in 2008/2009, all the chickens come home to roost. The Global Financial Crisis suddenly places huge new fiscal demands on Western governments as their economies and stock markets collapse. The surpluses that might once have been available to help the working poor get replaced by mountains of debt, almost overnight. Rather than extending a helping hand, governments leave the working poor even worse off as a lengthy economic crisis takes hold in rich countries.
Debt stocks in rich countries rise sharply in the aftermath of 08/09 (Source: here)
Polical neglect of vulnerable groups within rich countries, both in the run-up to 2008/2009 and afterwards, proves costly. When the needs of entire segments of the population are ignored, there will eventually be a major political backlash. The backlash, when it arrives, turns out to be far worse than expected, because the economic crisis has turned the working poor into a much larger group and therefore a bigger force in the political landscape.
The working poor in rich countries consist of mainly white, badly educated, deeply ignorant, prejudiced, religious, gullible, and very angry people. Many feel entitled on racial grounds. These characteristics make this group ripe for political exploitation, especially by ambitious nationalist and fascist politicians. It is therefore no surprise that Far-Right populists in Europe and the United States make all-out efforts to woo them. The Far-Right soon racks up major gains in the polls, soon after at the ballot box.
The new crop of elected Far-Right nationalist leaders – UK’s Boris Johnson, Hungary’s Viktor Orban, Holland’s Geert Wilders and Donald Trump in the United States – ruthlessly exploit the ignorance and prejudices of the working poor. They employ blatantly populist methods, such as scapegoating of immigrants and blaming globalisation and China for the deteriorating conditions of the working poor. They call for complete disengagement with the rest of the world, including a halt to free trade.
Nationalism is back (Source: here)
Anti-immigration and anti-free trade policies have strong emotional appeal with the working poor, who completely buy into the lie their problems are caused by foreigners. Before long, politicians across the political spectrum in Western economies begin to dance to the same tune, tightening immigration policies and embarking on hugely costly trade wars with China.
Misinformation soon emerges as a key feature of Far-Right political strategy, just as it did under Hitler. By now, the establishment has become so distrusted by the working poor that even the most self-evident facts - such as the efficacy of vaccines - are dismissed out of hand. It becomes practically impossible to communicate across the political divide.
The collapse in political dialogue is deeply problematic, because the policies put forward by fascists and nationalists are in fact very bad for Western economies. It is a fact that vaccines have huge positive health benefits. It is a fact immigrants make net positive contributions to the economy. It is a fact that tariffs are paid by consumers in importing countries. It is a fact that expelling immigrants worsens public services. But facts are no longer trusted due to political polarisation. Facts are like water off a duck’s back.
As a result, the Far-Right receives almost no push-back as it effectively locks wealthy economies into self-reinforcing spirals of economic and political decline; economic stagnation leads to more political nationalism, which in turn leads to worse policies and yet more economic stagnation. Brexit is an obvious case in point.
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The internal political dynamics in rich economies also bring about important changes in Western foreign policy. All markets, even free ones, require governance and rules. When the Cold War ends, there is initially hope that the European Union and the United States – who, after all, won the Cold War on the strength of their economic systems – will act as custodians of globalisation, not least because the flaws in the post-World War II global governance institutions have still not been fixed.
Unfortunately, the faith placed in the US and Europe soon proves to be without counterpart in reality. In a series of revealing incidents, the US and its coalition partners are exposed as unwilling and incapable of acting as custodians for anything other than their own narrow self-interests.
The most revealing incidents are:
9/11: The US response to the terror attacks on New York and Washington DC exposes the limits of America’s capacity for dispassionate and equitable policy action. US President George W. Bush adopts a highly divisive ‘them versus us’ stance, proceeds to attack the wrong country, and eventually kills more than half a million innocent civilians. In so doing, Bush squanders much of the credibility as independent arbiter the US accumulated as victor coming out of in the Cold War.
The Second Iraq War: The Second Iraq War lasts eight whole years (2003-2011), far longer than even the most ardent critics had feared. Each year the war drags on, the US gets more and more criticism until, in the end, Washington’s willingness to assume new global leadership responsibilities is entirely gone.
Wikileaks: In 2010, the reputation of the US as a global arbiter suffers yet another blow, when classified documents leaked by Chelsea Manning and Julian Assange expose gross hypocrisy at the heart of US foreign policy.
Arab Spring: In the early 2010s, the West is once again exposed as biased, self-interested, and hypocritical, when it fails to support democratic movements in the Middle East and North Africa, because they happen to be led by people, who are opposed to the pro-Western dictators in the region.
Syrian chemical attacks: In 2013 and then again in 2018, the West shrinks from taking meaningful action against Syria over its use of chemical weapons.
Afghanistan: In 2021, the final nail is hammered into the coffin of Western leadership, when the US and its coalition partners abandon Afghanistan to the Taliban, undoing twenty years of investment specifically designed to prevent the Taliban from ever returning to power.
The lessons from these incidents are crystal clear: First, there is neither global governance nor Western leadership in the era of globalisation. Second, nations with powerful militaries, fascist leaders, and expansionist ambitions have carte blanche to as they please, including attacking weaker neighbours.
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It is difficult to exaggerate the significance of this shift in international relations. During the Cold War, especially following the costly staemate in the Korean War and America’s defeat at the hands of VietCong and the North Vietnamese conflicts tend to be internal affairs. The CIA and KGB sponsor plenty of coups, arm rebel groups, make targeted assassinations, and finance civil wars, but outright invasions of other countries are few and far between, because behind each country stands a Superpower. Overall casualty rates were also relatively low.
Many but relatively small - US interventions during the Cold War (Source: here)
With the return of nationalism, this starts to change. With Superpowers no longer protecting the sovereignty of smaller client states, there is nothing to prevent more powerful neighbours from taking advantage. Cross-border conflicts therefore become more common again. Turkey suddenly engages in a free-for-all in Syria. Venezuela suddenly makes claims on oil deposits in neighbouring Guyana. Russia feels emboldened to invade Ukraine. Israel, using the 7 October Hamas attack as pretext, is finally able to execute the long-standing wish of its religious Far-Right nationalists to eradicate the Palestinian people. In fact, no longer content to merely destroy Gaza, Israel now bombs Lebanon, Yemen, and Syria. Iran may well be next, because why not?
No one will intervene.
We are back to the dark days that preceded the Second World War. We are in new and stark reality we have not seen in eighty years in which nothing prevents the strong from dominating the weak. Rules no longer matter.
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Mind you, we are still only in the very early days of this new era of fascism and nationalism. The costs of cross-border conflicts have so far been limited and localised. Casualties are still low compared to the big regional and global wars of the past. Ordinary people in the West have not yet felt much impact on their own lives, although the inflow of Ukrainian refugees in the wake of the Russian invasion is undoubtedly a sign of things to come.
Smaller localised low-intensity cross-border conflicts may carry on indefinitely, but it is far more likely they will intensify over time. History clearly shows that fascist and nationalist regimes are inherently conflict-seeking. Left unchecked, they always push for more, thus begetting ever larger conflicts. Ultimately, they all turn out to be unsustainable, but defeating them can be hugely expensive in both money and lives.
Periods of nationalism and fascism usually end when the actions of fascist regimes generate sufficient outrage to trigger a global response, just as happened in World War II. Unfortunately, judging by the global reactions to Russia’s invasion of Ukraine and Israel’s crimes against Palestinians the world is nowhere near its tolerance threshold. This means that, for now, the bullies are winning, with democratic nations nowhere near defining a coherent response. It is therefore safe to assume that already-established fascist regimes, such as Russia, will get bolder, while potential new bully states must surely be readying adventures of their own.
Things will get much worse before they get better. The night of nationalism will darken further before we discern the arrival of a new dawn in international relations.
The End
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