Photo: Reuters
Photo: Reuters

Opinion | Recalling Huntington, 10 years after the financial crisis

The crisis of 2008 exposed the underlying fault-lines and post-crisis policies provided ammunition

As we mark the tenth anniversary of the global financial crisis, articles analysing the crisis, and its causes and consequences, are sprouting up everywhere. It will also soon be the tenth year of the passing away of professor Samuel Huntington. Francis Fukuyama has written a long essay on his legacy. It is a defence of his own thesis on the “end of history" and a critique of the Huntington thesis that religious affiliations would structure the future world order. He notes that identity, rather than religiously-based culture, is a better route to understanding contemporary politics. He may well be right but explanations of social phenomenon—including Huntington’s—are better seen as points of departure. Reading The Clash Of Civilizations And The Remaking of World Order now makes one realize how prescient Huntington was in many respects.

The single most important motivation for the rise of populism—the promise of easier redistribution—and nationalism —borders matter—is a rejection of the consequences of the post-1980s world order. That world order, characterized by globalization of production of goods and services, freer trade, freer immigration and financialization, began slowly at first in the 1980s but gathered momentum after the collapse of the Soviet Union. That was a watershed moment, as we will see later. Finally, it became a coalition of asset holders, footloose, educated, internationally-mobile citizens from the developing and the developed world. and capital-owners that was comfortable chasing gainful employment and returns across borders. They sought to clothe their self-interested pursuits in a language that appeared lofty and transcendental, but, behind the veneer was about self-interest-driven pursuits. For a while, ordinary people got something out of it too, and hence, relative inequality did not bother them too much.

The oil price collapse in the 1980s compensated for the decline in nominal wage growth. The technology boom of the 1990s provided some real wage growth, but, in the new millennium, it was all about credit and credit-driven boost to real estate and, hence, household net-worth. Now, no positive surprises await. Only the threat of mass layoffs from the introduction of robots and artificial intelligence hangs in the air. Financial asset prices have recovered a lot more than home prices in places that experienced housing bubbles previously. In other places that experienced housing bubbles after 2008 (Sydney, Auckland and Vancouver), foreigners and the local rich have benefited as subprime housing loans are passé now. The backlash was inevitable. The Greeks voted to reject European conditions but were smothered. But Donald Trump and Brexit could not be stopped or anticipated. So that brought out the economic identity.

Consequently, socialism and state-ownership are making a comeback. A socialist candidate won the Democratic primary for the US Congress and Britain has renationalized a prison and rail service. Notwithstanding the fact that they are rehashing failed policies, Bernie Sanders, Elizabeth Warren and Jeremy Corbyn are being heard. They may be useful and desirable only to the extent that they push back the excesses of capitalism. But they are not viable alternatives.

What drives the emergence of nationalistic-religious identities? Elites’ concern for oppressed Muslims sits very uncomfortably with a silent indifference to the rather inhuman dogmas, practices and edicts that governments and rulers in Islamic countries have embraced. The inconsistent response or non-response of the “Davos man" to the absence of human rights, civil rights and the rule of law in some societies, including China, adds a thick layer of hypocrisy and inconsistency to the self-interest-driven behaviour, cementing it. That explains the emergence of nationalistic-religious identities.

Davos persons are conflicted when it comes to equality. On one hand, they claim to celebrate diversity and differences. On the other, they want equality regardless of differences. Yuval Noah Harari wrote in Sapiens that evolution was based on differences , not equality. In fact, he argues that democracy and equality are incompatible because the latter can only be mandated. It is not natural. That brings out additional layers of identities—race and gender.

An overarching explanation that subsumes the rise of identities is that the success of Davos persons over communism in the 1980s has been their undoing. Huntington was right that, for self-definition and motivation, peoples needed enemies. Harari noted that sapiens instinctively divide humanity into two parts, ‘we’ and ‘they’. Tyler Cowen gets it. In his Bloomberg column, ‘When And Why The World Went Wrong’, he writes that in the absence of strong external enemies, cooperation broke down. Spoils of victory over the external enemy have been unequally divided and hence, sub-identities have come to the fore.

In short, post-World War II, the cold war, economic growth and then the opium of debt had helped paper over divisions in Western societies. The crisis of 2008 exposed the underlying fault-lines and post-crisis policies provided ammunition. The clash is in its early stages. Fukuyama might be right about the emergence of identity-consciousness explaining contemporary politics but Huntington might be eventually right about the drivers of the future world order. The sub-identities will coalesce around broad cultures and religions. In short, civilizations. It is too soon, therefore, to declare Huntington wrong.

V. Anantha Nageswaran is an independent consultant based in Singapore. He blogs regularly at Thegoldstandardsite.wordpress.com. Read Anantha’s Mint columns at www.livemint.com/baretalk

Comments are welcome at baretalk@livemint.com

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