The New Year comes with great uncertainties. The collapse of the Soviet Union, a quarter-century ago, marked “the end of history", in Francis Fukuyama’s memorable expression. Because apparently there was an end to the uncertainty about the course of human civilization. “Western" models, of democratically elected governments, and of economies run on principles of capitalism and free markets, had triumphed. There was only one way for institutions to progress—towards more electoral democracies, and economies constituted with private enterprises and less government; also, more globalization of trade and finance. The rules of the global order were established by a coalition of business and political leaders rooted in the West. In this world view, the 21st century would see the rise of Asian economies who would join the global order and play by the rules laid down by the West

In 2016, large cracks appeared in that world view. Globalization of trade and the advance of free markets stalled. Authoritarianism, with popular support, rose on many continents. Nor is the West being threatened only from outside, with China (and Vladimir Putin too) flexing muscles against Western hegemony. Within the West itself, various anti-establishment, populist movements from both the left and the right are shaking the system: the shock of Brexit, the victory of Donald Trump’s (and Bernie Sanders’) anti-establishment politics in the US, and a rising tide of nativist, authoritarian, political leaders in Europe.

The anti-Western establishment surge has been fuelled by globally rising inequality and insecurity.

Statistically, globalization has lifted all boats. Absolute levels of poverty, in aggregate terms, are in decline everywhere. Globalization has also created winners and losers. Some people have become very wealthy. The top 1% have accumulated large portions of their countries’ economic wealth, and they are also avoiding paying taxes, while incomes at the median have stagnated and unemployment of youth is increasing. People perceive this system as unfair. They fear the rules of the game are being fixed by an elite establishment that does not even care to listen to the concerns of the rest. When it does, it dismisses them as ill-informed, and continues to sell them the benefits of globalization which the elite seem to be benefiting from much more than the rest.

Populist movements both on the left and right are railing against the top 1%, and the cosy relationship between them and their governments. They also resent loss of domestic jobs to foreign countries. In addition, populist movements on the right are also demanding tougher action against terror and violence. Thus inequality and insecurity have created conditions for populist and authoritarian governments.

History progresses in waves. Globalization waxes and wanes. Conservative and liberal governments alternate. Human civilization advances with each wave cresting higher than the previous one, setting new standards. Institutions of political, social and economic governance are vehicles evolved by societies to take human civilization further. Since the turn of the century, and even before the global financial crisis, global surveys have recorded a decline in citizens’ trust in institutions of government as well as large business corporations. Together, these institutions were the Establishment that was setting the rules of the game. Government and corporate leaders, in a celebratory mood about the progress of globalization, did not take the surveys seriously. The result is the emergence of populist movements that are upending political establishments in the West, as well as the return of East-West geopolitics which had supposedly ended with the collapse of the Soviet Union and the victory of the US-led, capitalist, democratic, liberal alliance.

How will history progress in the next 20 years? When will faith in globalization return, and how soon will trust in liberal, democratic governments be restored? It depends on the improvements that will be made in institutions of capitalism and democracy. Capitalist institutions and democratic institutions run on fundamentally different principles. Respect for private property rights is fundamental for capitalism. Respect for the human rights of every living person is fundamental for democracy. Good governance of capitalist institutions is based on the principle that voting power must be related to amounts owned. Therefore, one dollar must equal one vote, and ownership of more dollars must give greater clout. Whereas, for genuinely democratic governance, rich and poor must have an equal say in the election of their governments as well as in the formulation of public policies.

An innovation in the management of capitalist corporations that will trigger the reforms required to restore trust in corporations is the adoption of broad scorecards that transparently report the impact of the corporations’ business operations and products on the condition of communities—health, local jobs created, skills developed, affirmative action, etc., and on the environment. The preparation of such scorecards will require corporations to listen to the diverse stakeholders they ignore when they focus only on the scorecards of profits and financial value created for investors. National scorecards, too, should go well beyond their excessive concentration on gross domestic product as a measure of the progress of the economy. Societal conditions—jobs created, affirmative action, empowerment of local communities, etc., as well as impacts of growth on the environment—water scarcity, air pollution, green cover, renewable energy must appear in balanced scorecards of national progress. Indeed, efforts are already being made in some countries to create such innovative scorecards for national progress. There are also movements to introduce more balanced reporting for businesses. However, these efforts are on the fringe. They must be mainstreamed by national mandates.

The funding of political parties and election campaigns must also be reformed to restore faith in the quality of democracies. Money is required to fund campaigns for votes. But it is essential, to maintain the quality of a democracy, that those who have more money should not be able to influence the outcomes of elections and contents of public policies more than those who have no money.

Arun Maira served in the erstwhile Planning Commission.

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