The president’s belief that the nation state can cure economic ills is not without merit
Once every three years the International Monetary Fund and the World Bank hold their annual meetings out of town. Instead of schlepping over to Washington, the gathering of finance ministers and central bank governors is hosted by a member state. Ever since the 2000 meeting in Prague was besieged by anti-globalisation rioters, the away fixtures have tended to be held in places that are hard to get to or where the regime tends to take a dim view of protest: Singapore, Turkey, Peru.
This year’s meeting will take place in a couple of weeks on the Indonesian island of Bali, where the IMF and the World Bank can be reasonably confident that the meetings will not be disrupted. At least not from the outside. The real threat no longer comes from balaclava-wearing anarchists throwing Molotov cocktails but from within. Donald Trump is now the one throwing the petrol bombs and for multilateral organisations like the IMF and World Bank, that poses a much bigger threat.
Related: Who’s laughing now? The science behind the UN’s reaction to Trump | Sophie Scott
Politicians have failed to come up with a transformation in how we view the role of the state and market
Ten years ago tomorrow, the US government allowed the Wall Street bank Lehman Brothers to go bust, an event that seemed to mark a historical denouement: the end of an American century culminating in humiliating failure of its economic policy. In the days that followed, the shock waves crippled other major institutions, petrified money markets and ultimately destroyed millions of jobs. The banking crisis was transatlantic: German lenders were bailed out, in Ireland the state stood behind bank liabilities three times the size of the nation’s GDP, and in Britain one of the biggest banks in the world, RBS, was nationalised. The only comparable event was the great depression of the 1930s. As the historian Adam Tooze, in his magisterial work Crashed: How a Decade of Financial Crises Changed the World, points out, “global industrial output, stock markets and trade were all falling at least as fast in 2008-2009 as they had in 1929”.
The economic consequences of events a decade ago are still reverberating through politics. While ordinary workers in advanced economies saw public services cut, wages stagnate and living standards fall, the state saved the collapsing financial system by creating money and cutting interest rates. In the US, while the banks and lenders were bailed out, more than 9 million American families lost their homes to banks or were forced to sell up. In Britain, bankers’ bonuses are almost back to pre-crisis levels, while the nation endures the longest period of wage stagnation since the 1860s. The 2008 financial crash exposed the US Federal Reserve as the vital link in a global chain of a few dozen banks. According to Mr Tooze, the Fed’s unpublicised role was to bail out the world. It provided about $5tn in liquidity and loan guarantees to large non-American banks. It also sent $10tn to foreign central banks through currency swaps. All this money was eventually repaid, with interest, but it was nevertheless made available to the banks, their shareholders and their outrageously remunerated staff who had, through acts of commission or acts of omission, brought the world to its knees.
Donald Trump has channelled the anger felt by globalisation’s discontents to serve an agenda in line with elite interests
Donald Trump’s decision to launch trade wars against all five of the United States’ closest commercial partners has brought depressingly predictable responses. China, Canada, Mexico and the European Union have all countered with tariffs on US products. The US economy is the biggest in the world and can deal with many of the responses, which are a pinprick on its giant heft. However, Mr Trump’s political base is vulnerable – and the retaliating quartet have responded with actions designed to hurt communities that voted for the US president. This entirely foreseeable response confirms that trade is something he cares deeply about but also knows little about.
It does not help that Mr Trump is a narcissist with no time for the subtleties of global diplomacy. He is meeting European commission president Jean-Claude Juncker for talks on Wednesday. He calls the EU a “foe” because of its $101bn trade surplus with the US. A sensible solution for Washington is one that it vetoed when John Maynard Keynes proposed it in 1944: countries with surpluses ought to spend their extra money in deficit countries, thus boosting both private spending and export capacity. It is ironic that Mr Trump is attempting something similar by bullying rather than through what might have been achieved by multilateral arrangements. The president is happy to be swinging a wrecking ball at the world trading system. But it has been swung before. The US has been squabbling with partners who have had trading surpluses for decades. All American leaders understand that foreign nations have a great deal to lose from sanctions, imposed by Washington, that limit access to the huge US market. Because sanctions are determined unilaterally, there is little that countries can do to resist a claim that they have cheated their way into American markets.
After decades of globalisation, our political system has become obsolete – and spasms of resurgent nationalism are a sign of its irreversible decline. By Rana Dasgupta
What is happening to national politics? Every day in the US, events further exceed the imaginations of absurdist novelists and comedians; politics in the UK still shows few signs of recovery after the “national nervous breakdown” of Brexit. France “narrowly escaped a heart attack” in last year’s elections, but the country’s leading daily feels this has done little to alter the “accelerated decomposition” of the political system. In neighbouring Spain, El País goes so far as to say that “the rule of law, the democratic system and even the market economy are in doubt”; in Italy, “the collapse of the establishment” in the March elections has even brought talk of a “barbarian arrival”, as if Rome were falling once again. In Germany, meanwhile, neo-fascists are preparing to take up their role as official opposition, introducing anxious volatility into the bastion of European stability.
But the convulsions in national politics are not confined to the west. Exhaustion, hopelessness, the dwindling effectiveness of old ways: these are the themes of politics all across the world. This is why energetic authoritarian “solutions” are currently so popular: distraction by war (Russia, Turkey); ethno-religious “purification” (India, Hungary, Myanmar); the magnification of presidential powers and the corresponding abandonment of civil rights and the rule of law (China, Rwanda, Venezuela, Thailand, the Philippines and many more).
Related: Globalisation: the rise and fall of an idea that swept the world
When it comes to the end of work as we know it, ableism is surely at the core of this flawed perspective, writes Bella Milroy. Plus Patrick O’Sullivan says local communities must become self-reliant
Want to radically rethink the concept of work? Start talking to disabled people. As vitally important as the case for a universal basic income is, as Larry Elliott observes (Robots will take our jobs. We’d better plan now, before it’s too late, 1 February), a debate that focuses solely on the concept of paid work will only take us so far, and fails to acknowledge the millions of disabled people, as well as millions of carers, who go unpaid for the work they do every day.
When it comes to the end of work as we know it, ableism is surely at the core of this flawed perspective. Disabled people have been redefining the idea of what it means to work, to create, to find purpose and to contribute to society since the dawn of time, the majority of which goes unpaid.
Democracies will fall under the spell of populists like Donald Trump if they fail to deal with the fallout of globalisation
The rich, as F Scott Fitzgerald noted, “are different from you and me”. Their wealth, he wrote, makes them “cynical where we are trustful” and their affluence makes them think they are “better than we are”. These words ring truest among the billionaires and corporate executives flocking to the Swiss ski resort of Davos this week. The highs recorded by stockmarkets, the tremendous monopoly power of tech titans and spikes in commodity prices reassure the rich cosmocratic class that they have weathered the storm of the financial crisis. The moguls can talk safely about inequality and poverty. But they will do little about it because they do not think their best interests are aligned with citizens. This is a mistake of historic proportions.
Since 2015, Oxfam calculates, the richest 1% have owned more wealth than the rest of the planet. The very wealthy think they no longer share a common fate with the poor. Whatever the warm words at Davos, no company bosses will put their hands up to the fact they play one country against another in order to avoid taxes; no firm will be honest about their attempts to stymie trade unions or about how they lobby against government regulation on labour, environment or privacy that tilts the balance of power away from them and towards the public. The largest western corporations and banks now roam the globe freely. As memories of the financial crisis recede, they are going back to the myth that they are no longer dependent on national publics or governments. Lobbyists for the corporate world claim that markets are on autopilot, that government is a nuisance best avoided.
A conciliatory speech would alienate his base; a repudiation of Nafta would create shockwaves. Either way, this is a significant moment
The annual meeting of the World Economic Forum will come to a climax on Friday when Donald Trump becomes the first US president since Bill Clinton to address the Davos talkfest.
To say that Trump’s lunchtime speech is eagerly awaited is an understatement. Excitement has been building ever since the White House announced that the president would join Emmanuel Macron, Theresa May and Narendra Modi at this year’s event.
Tom Kibasi on proposals for a ‘digital commons’ and increasing worker ownership, Andy Chapman on Common Good Balance Sheets, and Peter Taylor-Gooby on better education, more training and decent cheap childcare
In introducing his welcome new series on economic alternatives, Aditya Chakrabortty rightly castigates those who continue to promote the failed economic ideas of the past (It’s time to take on the zombies, 17 January). But he underestimates the extent to which a vibrant network of thinktanks, academics, campaigning and community organisations are now “rethinking capitalism” in pursuit of a society fit for the future.
Here at IPPR we are working on everything from new approaches to macroeconomic policy to the proper taxation of wealth, from proposals for a “digital commons” to devolved economic governance, from increasing worker ownership to a new framework for environmental policy.