National Priority: From Ideology to Governance
By Henry Hing Lee Chan

National Priority: From Ideology to Governance

Dec. 08, 2016  |     |  0 comments

When Francis Fukuyama published his book “The End of History and the Last Man” in 1992, the USSR had just collapsed and the idea of liberal capitalist democracy seemed unstoppable throughout the world. He proudly proclaimed the “end of history” and the inevitable triumph of liberal capitalist democracy. His argument was simple and appealing: democracy would win out over all other forms of government because it fulfils the natural desire for peace and well-being, and it can set a country on an irreversible path to progress that is impossible to divert. If a state — communist or whatever — wishes to enjoy the greatest possible prosperity, it must embrace some measure of capitalism. Since wealth-creation depends on the protection of private property, the “capitalist creep” would invariably demand greater legal protection to individual rights.

The ideas espoused under liberal capitalist democracy — equal rights for all, rejection of racial differences, respect for religious freedom, and an economic order that protects private property rights, allowing individual ambitions to flourish, removal of industrial regulations, and encouragement of globalization — were then taking the world by storm. Though there were doubts on many of the components of liberal capitalist democracy in developed countries, and developing countries were sceptical about many of the merits of the ideas, it was hard to disagree to the propositions of Fukuyama.

The long-running Cold War had just ended with the collapse of Soviet Union, Germany was reunited under West German terms, the modified laissez-faire free market championed by Reagan and Thatcher had brought about renewed vigor to the Anglo-Saxon economies, globalization was bringing persistent low inflation, and a credit-fuelled boom had brought a goldilocks economy with low inflation, low unemployment, good asset price performance, that seemed to make everyone happy. Many macro-economists had proclaimed the death of macroeconomics as the Greenspan put had been effective in modulating economic fluctuations. Everything seemed to suggest that only liberal capitalist democracy could bring so many goodies to the people in an increasingly globalized world, and that only the steady advance of modified laissez-faire capitalist economics would guarantee a future of free and democratic states.

The economic bust of 2008 had not really dented the people’s trust on the liberal order at the onset. The initial reaction was that the subprime bust was just a small blip in the history of events, and that the resilience of the liberal capitalist democratic order would soon heal itself and restore the economy to sustainable growth. Unconventional monetary policy such as Quantitative Easing (QE) was accepted as a sound policy tool to stabilize the economy. The faith in the liberal capitalist democratic model was so strong that people simply forget to look at the underlying productivity stagnation problem and the dangerous trend of growing income inequality. The election of Barack Obama as president of the US in 2008 and the Arab Spring in 2011 reinforced the belief in liberal capitalist democracy.

Liberal capitalist democracy became the established social ideology in the 1990s and 2000s around most parts of the world.

The Turning Point

Thomas Piketty’s 2013 book “Capitalism in the 21st Century” somehow marked the turning point of popular trust in liberal capitalist democracy. The income inequality highlighted in the book and the recovery since 2009 which remained subpar despite massive liquidity injections through various kinds of QE around the world suddenly awoke many people to the fact that the current economic order had produced many “losers” in the system. The unravelling of the Middle Eastern geopolitical order after the Arab Spring brought so many refugees to Europe that it threatened the existing social order. Instead of showing to the world that the US had eliminated racial problems with the election of Obama as president, the rise of the Tea Party and Republican obstructionism to the Obama administration indicated a subtle resurgence of racial differences. The rise of ISIS espousing Islamic fundamentalism and open civil war in many countries in the Middle East indicated that many people around the world do not embrace the predominant social order.

2016: An Anti-Establishment Year

The simmering discontent against the liberal capitalist democratic order came into the open with the election of Rodrigo Duterte as the Philippine president in May. His unconventional statements on US-Philippine relation; his approach of engagement rather than confrontation in handling the Philippines’ claims in the South China Sea; and his stinging remarks against Obama, the Pope, and foreign dignitaries were considered taboo in the Philippines. He was neither a good speaker nor a charming person, and elections in the Philippines often favor candidates with good public appearances. However, people looked the other way on his shortcomings and chose to believe in his ability to replicate his earlier record as a Southern City mayor on a national scale. His election was more a case of an anti-establishment discontent vote.

The Brexit referendum in June proved that such discontent was not limited to developing countries. The Brexit decision was so unexpected and the voting pattern of rural England against London, Scotland, and Wales demonstrated the strong anti-immigrant, anti-EU protest of the losers of globalization. It is common sense that splitting from the EU would entail significant economic costs on the nation. However, the perception of the Brexit proponents that it is going to be the earlier winners of globalization who will shoulder the cost of Brexit makes their decision apparently logical. The apathy of the losers of globalization and their anti-establishment feelings as manifested in the Brexit vote are clear.

There are simply too many people being left behind and they are increasingly turning hopeless. The failure of capitalism has turned democracy against liberalism.

The Philippine and UK anti-establishment votes are not enough to swing against liberal capitalist democratic ideology. These two countries are not influential enough on a global scale to swing global intellectual thoughts and elicit a re-examination of the defects of the prevailing order. However, the election of Donald Trump on November 8 is a different story.

Donald Trump was an anti-establishment figure from the start of his Republican presidential bid, and many Republican party leaders refused to endorse his candidacy until the end of the election campaign. He won 306 electoral votes against Hillary Clinton’s 232. Even though his popular vote of 61.8m is less than Hillary’s 63.5m, the clean sweep by Republicans who obtained a 51 vs 46 majority in the Senate, 239 vs 193 majority in the House of Representative, 33 governorships in the 50 states, and control of 68 out of 100 state legislatures, gives Donald Trump a strong mandate. Many analyst have credited him for carrying the party in many of the state elections.

Trump promises to roll back free trade, slow down legal immigration, crack down on illegal immigration, and ask the US’ overseas allies to shoulder more of the cost of US troop deployments. Though he maintains strong commitment to laissez-faire, his overall economic policy resembles more of an insular American closed door system rather than the open liberal capitalist system. His almost all male and all white advisory team seems to indicate a kind of white supremacy. It is unclear how many of his campaign promises will be implemented once he is in office. However, the message of the electorate is loud and clear — it is a kind of anti-establishment protest vote.

The US remains the global knowledge center and still possesses un-paralleled soft power influence on other countries. His policy priority change can be expected to influence other countries if Trump is to keep a large part of his campaign pledges and get elected for another four-year term in 2020.

Focus on Good Governance

The break-up of the connection between capitalism, democracy, and liberalism is not a surprise. It has become increasingly clear that the pursuance of laissez-faire economics is not the best way to attain prosperity, and free markets since the 1980s have enlarged the income gap across both the developed and developing countries. While it is not surprising for voters in countries hit by the recession such as Greece and Hungary to turn to economic interventionism, nationalism, and even racism, the turning away from liberal capitalism by rich countries such as the UK and US indicates the global issue of losers in the current system. There are simply too many people being left behind and they are increasingly turning hopeless. The failure of capitalism has turned democracy against liberalism. It seems that hubris has turned the defenders of the liberal capitalist order blind and they are unresponsive to the challenges around the world.

The campaign rhetoric of Trump and the shift of Duterte to “pivot to China” seem to indicate a new sense of realism in their thinking. While people still hold liberal capitalist democratic ideas close to their hearts, the economic reality will move social priorities to more earthly issues. People now want good governance that can deliver a good and stable life for themselves rather than lofty ideas of taking care of thy neighbors. How the change of social priority from ideas of liberal capitalism to good home governance will affect the world remains to be seen.

Can democracy effectively deliver the good governance that the citizens want? Or will a more autocratic type of government be more effective in delivering good governance? Or is the leadership issue that is more central to delivering good governance rather than the system of government? These questions have no simple answer and it will take time before people know the answer. However, this change of social priority is an epochal one and there will certainly be big changes ahead.

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