Europe, which has long been the baseline of liberal capitalist democracy, is going through serious tribulations, which are, I believe, a sign of an impending turning point in how the world will be governed. Most countries in Europe—certainly the core countries of the EU—have long been poster girls for a system which delivers an economically egalitarian and socially liberal society, much more so than, say, the US, where the hard edges of capitalism have delivered a separate and unequal society. However, over the past few years, even in Europe, liberal democracy has been in flight, with economic adversity and immigration fanning the politicised flames of divisiveness. Indeed, in much of the rest of the world, authoritarianism has already taken hold, with Putin (19 years), Erdogan (15 years), Xi (7 years), Modi (4 years) and Trump (2 years), not to mention heads of innumerable smaller countries, calling the shots like dictators of old.
This increasing authoritarian bent of governments appears to be overwhelming the consensus towards liberal democracy, that was the much sought after nirvana of governments till quite recently. But, that ideal soured after peaking when—as a very smart friend of mine pointed out—there was a black man in the White House, which was about 10 years ago. Since then, the world has been changing rapidly, with the new operational global ideology becoming”benign” authoritarianism. While that is clearly a contradiction in terms, the fact remains that each of these “leaders” appears to be reasonably well entrenched with their populations. To be sure, the regimes that are older in the tooth are beginning to see some opposition—both Putin and Erdogan now have visible challengers, even though the jackboot system is still holding up. Xi is, of course, another story—China always is. Modi is under pressure, even though he has been around for less than one term. It remains to be seen whether Indian democracy reasserts itself, as appears increasingly likely.
Trump, of course, the baby of the group, and the largest one at that, appears to be going from strength to strength. His gambit in North Korea, particularly coming as it did after his rude disregard of America’s longstanding allies, looks set to confirm his place as disruptor extraordinaire. His trade initiatives, which are uninformed by the reality that a trade deficit is really the reflection of the difference between how much a country spends and how much it saves, threaten to push inflation higher and growth lower, everywhere. On the other hand, some of his behind-the-scenes initiatives, which are just coming to public attention, could actually deliver real value to the US electorate. For instance, his administration’s focused price pressure on global suppliers of pharmaceuticals is already directly reducing the costs to US healthcare consolidators—of course, how much of that finds its way to consumers remains to be seen. Indeed, his push-me-pull-you approach to running the country has confounded financial markets, which normally run the other way as uncertainty increases.
Here, they appear to be embracing Trump’s madness and show no signs of retreating despite clear signals from the Fed that interest rates are heading higher. Again, the Republican Party has gone all in for Trump, and, given their astuteness in the ground realities of politics in the US, I would see it as a better-than-even bet that Trump will not just sail through his insulting first term, but will be re-elected. But, to my mind, the real story of where we are going is elsewhere—in Europe. As I mentioned, the EU and the Euro were, in many ways, the culmination of the liberal democratic capitalist ethos. Here was a group of countries, each unique but reasonably similar, that had de facto pledged to become one in a grand attempt at living the values of humanism—we may be different, but we will sink those differences to ensure that everybody can come to the party. Truly laudable values and great while they lasted, but, as things got tougher economically after the 2008 crisis, coming as it did right on the heels of the turn in the cultural worm (as my friend argued) with Obama’s election, things turned into a much more difficult, and losing, battle.
And, while the current crisis in Europe, triggered by political instability in Italy, appears contained, my sense is that, over the next two or three years (or less), there will be increasing crises to where the Euro certainly—but, perhaps not the EU—will end up in the waste bin of history. This will, of course, lead to crazy volatility in markets, and, what is worse, make things very difficult for a huge number of people. But, if I am correct, just as the election of Obama signaled the beginning of the end of the era of liberal capitalist democracy, the end of the Euro will signal the beginning of the end of the era of apparently acceptable authoritarianism. And, just as some autocrats took charge even while liberal democracy was apparently flourishing, some of them will now begin to flounder even as their approach seems to be gaining ground globally. A turning point is upon us and over the next decade, or so, there will be another sea change in global political organisation. Technology will drive decentralisation and the sharing of assets and experiences. The trend towards environmental, social and impactful investing will increase hugely, as will the vast armies of people everywhere who, even as we speak, are working towards a shared future. Find your role—you are uniquely qualified.