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 blooshed, the world resolves that a conflict 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 instituions get side-lined is that they are ill-suited to solve the new type of conflict that emerges after 1945, namely a Cold War. Even before the fighting of World War II has stopped, the Superpowers of Russia and the United States are already pursuing radically different 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 rest of the Cold War, the threat of nuclear Armageddon looms over the world.
To most of the world, the term ‘Cold War’ is actually a gross misnomer. The logic of the Cold War dictates that Superpowers do not face off directly, but rather skirmish with each other in countless proxy wars throughout the developing world. With the exception of a small number of non-aligned nations, most countries in Africa, Latin America, Eastern Europe, and Asia – numbering more than 150 nations in total – eventually get sucked into the conflict. The Superpowers secure allies in developing countries by plying ‘friendly’ dictators with guns and money, which allows the despots to rule with near-impunity. The result is disastrous for poor 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 are 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 can finally sing from the same song sheet. China emerges as a major player in the new reality. Unlike the Soviet Union, China has been able to transition from command economy to capitalism, albeit while retaining its one-party political system. Specialising in investment and exports, China is able to grow rapidly in the new environment 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 poor. Democracy in countries with many very poor people tends to produce quite conservative macroeconomic policies, which is precisely what poor countries need in order to grow. The logic is both simple and powerful: Any politician who wishes to be elected or re-elected in a country with larger numbers of poor people will have to respect their wishes. By dint of living at or close to the poverty line, the poor are highly economically vulnerable, so they prioritise stability and growth over all other policies.
Bowing to this political reality, elected officials across large numbers of poor countries adopt strong 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 leads to the development of 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 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 strong economic performance, many developing countries become sufficiently powerful to defend their own interests for the first time, ensuring the neo-Colonial controls exercised by rich countries over poor countries during the Cold War can never return.
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Unfortunately, globalisation, just like the Cold War before it, turns out to be yet another transitory state. The path to freedom and prosperity is far more arduous than expected as economic and political elites in many developing countries successfully 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 improved compared to during the Cold War, it is nevertheless the case that many developing countries really struggle to fully realise their potential due to the constant rear-guard actions from their entrenched elites.
More importantly, trouble is brewing in Western economies as they begin to feel the pinch of competition from emerging economies. Aided by their newly-found stability and growth, emerging economies are able to attract investment from rich countries, resulting in the relocation of entire industries from the United States and Europe to Asia and other parts of the developing world. The exodus puts downwards pressure on wages in the West and the poorest-educated workers fare particularly badly.
Immigration during this period – mainly of Eastern Europeans in Western Europe and of Asians and Latin Americans in the United States – also impacts low-paid workers adversely in the West, not least because discerning employers soon realise that immigrants work harder, are more motivated, and have better skills than local workers.
To add insult to injury, income inequality rises sharply within rich countries at this time. After all, ot everyone in wealthy economies are adversely affected by globalisation. Highly educated Europeans and Americans continue to do extremely well, but the really big winners are high-profile tech billionaires, whose wealth soon becomes is 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 rgar greater immigration, relocation of businesses to emerging economies, and the rise of tech billionaires do not cause the living standards of the working poor in rich economies to decline. Instead, these developments are different manifestations of the same wider phenomenon, namely the 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 ensure that losers can quickly regain fitness.
This does not happen, however. Instead, for years, politicians in rich countries pursue policies of neglect towards the working poor. Hell-bent on cutting taxes for the middle class, they cut public spending and put off investing in the poor in the hope that stock markets will somehow lift all boats. The same naïve logic underpins policy decisions not to curb the monopolistic excesses of the new tech giants even though perfectly suitable anti-trust legislation is available for this purpose.
Then, in 2008/2009, 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 could once have been made available to help the working poor are replaced by mountains of debt, almost overnight. Rather than getting a helping hand, the working poor now find themselves 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)
Policy myopia of the kind displayed by Western governments in the run-up to 2008/2009 proves costly, especially in political terms. When the needs of entire segments of the population are ignored, there will eventually be a major political backlash. The backlash, when it comes, 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 force to be reckoned with 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 are precisely the features that make this group ripe for political exploitation, a dream target for any ambitious nationalist or fascist politician. 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, then 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 emerges as a key feature of Far-Right political strategy, just as it did under Hitler. The establishment is soon so distrusted by the working poor that even the most obvious facts are dismissed out of hand. It becomes practically impossible to communicate across the political divide.
This is deeply problematic, because the policies put forward by fascists and nationalists are in fact deeply problematic. It is a fact that immigrants make net positive contributions in rich economies. It is a fact that clamping down on immigration worsens public services, because wealthy economies desperately need immigrant labour to help care for the sick and the aged.
But facts are now like water off a duck’s back.
Similarly, it is a fact that tariffs on Chinese exports raise prices and reduce choice for Western consumers, without sustainably aiding Western industries. But none of this cuts mustard with the brainwashed working poor.
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 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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