Winners and Losers
I am the master of my fate, I am the captain of my soul.
-William Ernest Henley
"It's time for a local revolution," the candidate told the roaring crowd. "Countries are no longer nations but markets. Borders are erased . . . Everyone can come to our country, and this has cut our salaries and our social protections. This dilutes our cultural identity." Marine Le Pen's four sentences capture every important element of the anxiety rising across the Western world. The borders are open, and the foreigners are coming. They will steal your job. They will cost you your pension and your health care by bankrupting your system. They will pollute your culture. Some of them are killers. Le Pen fell short in her bid to become France's president in 2017, but her message remains compelling for the twenty-first-century politics of us vs. them.
But this is not a story about Marine Le Pen or Donald J. Trump or any of the other populist powerhouses who have emerged in Europe and the United States in recent years. Spin the camera toward the furious crowd-there's the real story. It's not the messenger that drives this movement. It's the fears, often, if not always, justified, of ordinary people-fears of lost jobs, surging waves of strangers, vanishing national identities, and the incomprehensible public violence associated with terrorism. It's the growing doubt among citizens that government can protect them, provide them with opportunities for a better life, and help them remain masters of their fate.
As of December 2015, just 6 percent of people in the United States, 4 percent in Germany, 4 percent in Britain, and 3 percent in France believe "the world is getting better." The pessimistic majority suspects that those with power, money, and influence care more about their cosmopolitan world than they do about fellow citizens. Many citizens of these countries now believe that globalization works for the favored few but not for them.
They have a point.
Globalization-the cross-border flow of ideas, information, people, money, goods, and services-has resulted in an interconnected world where national leaders have increasingly limited ability to protect the lives and livelihoods of citizens. In the digital age, borders no longer mean what citizens think they mean. In some ways, they barely exist.
Globalism-the belief that the interdependence that created globalization is a good thing-is indeed the ideology of the elite. Political leaders of the wealthy West have been globalism's biggest advocates, building a system that has propelled ideas, information, people, money, goods, and services across borders at a speed and on a scale without precedent in human history.
Sure, more than a billion people have risen from poverty in recent decades, and economies and markets have come a long way from the financial crisis. But along with new opportunities come serious vulnerabilities, and the refusal of the global elite to acknowledge the downsides of the new interdependence confirms the suspicions of those losing their sense of security and standard of living that elites in New York and Paris have more in common with elites in Rome and San Francisco than with their discarded countrymen in Tulsa, Turin, Tuscaloosa, and Toulon. "The globalists gutted the American working class and created a middle class in Asia," former White House strategist Steve Bannon told the Hollywood Reporter a few days after Donald Trump's 2016 election victory. "The issue now is about Americans looking to not get fucked over."
In the United States, the jobs that once lifted generations of Americans into the middle class-and kept them there for life-are vanishing. Crime and drug addiction are rising. While 87 percent of Chinese and 74 percent of Indians told pollsters in 2017 that they believe their country is moving "in the right direction," just 43 percent of Americans said the same.
In Europe, the European Commission and the unelected bureaucrats who enforce its rules have legislated for its twenty-eight member nations without understanding their varied needs. In recent years, they've failed to halt a debt crisis that forced many Europeans to accept lower wages, higher prices, later retirement, less generous pensions, and an uncertain future, all while telling them they must bail out foreign countries that have spent their way into debt. In the migrant crisis, globalist European leaders insisted that all EU members must accept Muslim refugees in numbers determined in Brussels, and barricades and a spike in nationalism were the result (I define "nationalism" as one form of us vs. them intended to rally members of one nation against those of other nations).
Were the wave of populist nationalism sweeping the United States and Europe the only signs of globalism's failure, it would be bad enough. But there's a larger crisis coming. Many of the storms creating turmoil in the U.S. and Europe-particularly technological change in the workplace and broader awareness of income inequality-are now headed across borders and into the developing world, where governments and institutions aren't ready. Developing countries are especially vulnerable, because the institutions that create stability in developing countries are not as sturdy, and social safety nets aren't nearly as strong as in the United States and European Union. They face an even bigger gap between rich and poor, and the reality that new technologies will kill large numbers of the jobs that lifted expectations for a better life will be much harder to manage. In short, just as the financial crisis had a cascading effect through financial markets and real economies around the world, so the sources of anger convulsing Europe and America will send shock waves through dozens of other countries. Some will absorb these shocks. Some of them won't. As poorer people in developing countries become more aware of what they're missing or losing-quality housing, education, jobs, health care, and protection from crime-many will pick up rocks.
It is not rising China, a new Cold War, the future of Europe, or the risk of a global cyberconflict that will define our societies. It's the efforts of the losers not to get "fucked over," and the efforts of the winners to keep from losing power. Not just in the United States and Europe, but in the developing world too, there will be a confrontation within each society between winners and losers.
And winners and losers there will be. It's too late to assuage the anger of people whose needs have been neglected for years, too late to stop the technological advances that will exacerbate the inequality and nativism stirred up by globalism. What remains to be seen is who will win-and who will be the scapegoat. In some countries, us vs. them will manifest as the citizens versus the government. In other countries, the division will be between the rich and the poor. In some cases, disgruntled citizens will blame immigrants for their problems, punishing "them." And in other cases, an ethnic majority will turn on an internal ethnic minority, blaming them for the problems.
"Us vs. them" is a message that will be adopted by both the left and the right. Antiglobalists on the left use "them" to refer to the governing elite, "big corporations," and bankers who enable financial elites to exploit the individual worker or investor. These are the messages we hear from Senator Bernie Sanders and Greek Prime Minister Alexis Tsipras. Antiglobalists on the right use "them" to describe governments that cheat citizens by offering preferential treatment to minorities, immigrants, or any other group that receives explicit protection under the law.
How will governments choose to react? The weakest will fall away, leaving us with more failed states, like Syria and Somalia. Those still hoping to build open societies will adapt to survive, attempting to rewrite social contracts to create new ways to meet the needs of citizens in a changing world. And many governments that have a stronger grip on power will build walls-both actual and virtual-that separate people from one another and government from citizens.
We can no more avoid these choices than the world can avoid climate change, and the time is now to begin preparing for a world of higher tides. This is the coming crisis. This is the conflict that will unravel many societies from within.
How did we get here?
In Europe and the United States, the battle of nationalism vs. globalism has deep historical roots, but recent history has given it a new intensity. First, there was the earthquake. The financial crisis of 2008-2009 drove anti-EU fury in response to bailouts and austerity in Europe and resentment of Wall Street and its political enablers in the United States. In the United States, the right dismissed the Occupy Wall Street movement as a vapid left-wing fringe group without significance. The left waved off the Tea Party movement as a motley assortment of angry, aging racists intent on "making America white again" and well-heeled Republican Party activists disguised as grassroots patriots. Other Americans ignored both sides as if nothing important were shifting in American politics. The migrant crisis and a series of terrorist attacks then boosted a more xenophobic set of politicians and political parties in Europe. A number of EU member states established temporary border controls, and some openly defied EU rules. Britons voted to take back control of their laws and borders in 2016, and Trump was elected president as a battering ram against globalist elites and the media in the United States.
Then the anger seemed to abate, and we experienced an illusion of moderation. Barricades in the Balkans and a deal between the EU and Turkey to sharply slow the flow of migrants into Europe eased the refugee crisis and pressure across the continent for another round of border controls. Anti-Muslim firebrand Geert Wilders finished second in Dutch elections in March 2017. Two months later, pro-EU newcomer Emmanuel Macron overcame the challenge from Le Pen to become France's president, though the broader election story was the sound defeat of traditional parties of the center-right and center-left that had dominated French politics for decades in favor of a candidate who, like Trump, had never before run for office.
The center-left showed renewed strength in Britain, though it relied on large numbers of working-class Brexit voters for its revival. Germany's Angela Merkel, defender of European unity, won a fourth term as chancellor. In the United States, the Trump backlash went into high gear. The new president's approval rating settled into a narrow range between the mid-30s and low 40s, and his legislative agenda stalled. Courts blocked some of his plans, and various scandal investigations kept him distracted, though Democrats found no credible message of their own for U.S. voters.
The next chapter is now being written, and it will not be a better one. That's because globalism contains the seeds of its own destruction: Even as it makes the world better, it breeds economic and cultural insecurity, and when people act out of fear, bad things happen.
Globalization creates new economic efficiency by moving production and supply chains to parts of the world where resources-raw materials and workers-are cheapest. In the developing world, the influx of capital from wealthier nations has created the first truly global middle class. In the developed world, this process bolsters the purchasing power of everyday consumers by putting affordable products on store shelves, but it also disrupts lives by killing livelihoods as corporations gain access to workers in poorer countries who will work for lower wages.
Trade has not become as toxic a political issue in Europe as in the United States. In part, that's because the European Union includes so many small countries that depend on trade for economic growth, and exports are a crucial growth engine for Germany, the EU's largest economy and de facto political leader. In fact, its current account surplus, a measure of the flow of goods, services, and investment into and out of a country, topped China's to become the world's largest in 2016.
In addition, social safety net protections in many European countries cushion the blow to workers when they're displaced by trade-related change. In exchange for the higher taxes they pay, Europeans enjoy more generous and longer-lasting jobless benefits than Americans, have broader access to health insurance, and pay lower tuition fees for both first-time and older students. Those who champion trade in the U.S. try to make up for these differences with promises that government will provide those who lose when trade moves jobs overseas with so-called "trade adjustment assistance"-money, retraining, and other forms of support. But these benefits are easier to promise before deals are approved than to deliver after they're signed and politicians no longer need to keep their word.
Beyond trade, globalization boosts technological change by exposing businesses of all kinds to international competition, forcing them to become ever more efficient, which leads to greater investment in game-changing innovations. Advances in automation and artificial intelligence are remaking the workplace for the benefit of efficiency, making the companies that use them more profitable, but workers who lose their jobs and can't be retrained for new ones won't share in the gains. Technological change then disrupts the ways in which globalization creates opportunity and shifts wealth.
As a result, large numbers of U.S. factory jobs have been lost not to Chinese or Mexican factory workers but to robots. A 2015 study conducted by Ball State University found that automation and related factors, not trade, accounted for 88 percent of lost U.S. manufacturing jobs between 2006 and 2013.
Broadening the effect, the introduction into the workplace of artificial intelligence is also reducing the number of-and changing the skill sets needed for-a fast-growing number of service sector jobs. The consulting firm McKinsey & Company has estimated that 73 percent of work in the food service and accommodations industries could be automated in coming years. More than half of jobs in the retail sector could be lost, and two-thirds of jobs in the finance and insurance sectors are likely to disappear once computers can understand speech as well as humans do. What does that mean for the future of work? What does it mean for the middle class? It means that jobs are eliminated, and the middle class continues to shrink. Though technological change may eventually create more jobs than it kills, there's not much reason for confidence that fired workers will get the education and training they need for tomorrow's more technically sophisticated jobs.
In the world's wealthiest countries, particularly the United States, wealth inequality has steadily widened as globalism has advanced. According to a study published by Pew Research in December 2015, "After more than four decades of serving as the nation's economic majority, the American middle class is now matched in number by those in the economic tiers above and below it." In 1970, middle-income households earned 62 percent of aggregate income in the United States. By 2014, their share had fallen to just 43 percent. The median wealth (assets minus debts) of these households fell by 28 percent from 2001 to 2013. Crime and drug addiction have spiked. Nearly 40 percent of U.S. factory jobs have disappeared since 1979. In 2018, U.S. stock markets hit historic highs as U.S. companies drew record profits, but the American middle class is in real trouble.
Copyright © 2018 by Ian Bremmer. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.