Four key policies must be worked on to fight nationalism and protect Western democracies, a task that is starting to look more and more like a fight for survival.
Most Western democracies have drifted towards nationalism in recent years, putting prosperity, if not even democracy itself, at risk.
In the US, President Trump has started to dismantle the US’ global leadership role under his “America First” mantra. The UK is abandoning 45 years of European cooperation, and nationalist parties now rule Poland and Hungary, are parts of governing coalitions in Austria and Italy, while wielding considerable influence over policies in many other countries.
For the past 70 years the world has been well served by a global governance system which aims to regulate via a set of multilateral agreements and institutions – with few obstacles – the movement of goods and services as well as investment flows. (The EU has gone further and removed virtually all restrictions on such movements, also for people). With the rise of nationalism, this is now at risk.
Rather than working within the rules-based multilateral system, nationalist leaders seem to favour “strong-man” bilateral deals with other “strong men”, often with case-by-case applications or exceptions for the politically favoured. Without a doubt, this will be bad for global growth and prosperity.
Of even greater concern, nationalist governments are attacking the bulwark of market-based liberal democracies. President Trump refers to the media as “the enemy of the people” and, in a stunning parallel to George Orwell’s “1984”, he claimed in a speech in July that “what you’re seeing and what you are reading is not what’s happening”. In the UK, Brexiters claim to be “tired of experts”. In Poland and Hungary, media outlets are being taken over by government loyalists and the judiciary branch is under attack.
To reverse this highly worrisome nationalist momentum, four key policy areas need to be furthered by those political leaders who are still committed to a rules-based liberal democracy:
First, the underlying problem of discontent in parts of society needs to be addressed: manual workers and other parts of the American and European labour force have seen their real income fall behind as manufacturing production moved from the OECD area to emerging markets and automation took over many routine jobs in the OECD. This aspect of globalisation benefitted primarily the capital owners and the labour force in the receiving countries.
As a result, the share of national income in the OECD allocated to labour compensation has dropped significantly to levels not seen since before the Great Depression, while the share of income allocated to capital increased comparably. Meanwhile, income inequality across society has accelerated, albeit mostly in the US where near-record levels have been reached.
Regional data and surveys confirm that it’s predominantly the losers in this shift of income who now vote for nationalist politicians and parties, and for Brexit in the UK. Yet, the solution to these folks’ situation, and to society as a whole, is not to be found in the policy agenda of the nationalists. Less trade and investment flows will only serve to make everyone poorer.
Rather, the solution lies in, first, boosting global growth by embracing globalisation and digitalisation and, second, changing policies to distribute the benefits better, including the training of as many as possible to operate more productively in this globalised world. Indeed, it’s striking that spending on education in OECD countries has remained broadly constant as a share of GDP in spite of the challenges (and opportunities) presented in recent years by digitalisation and the rise of China. Resources allocated to education and training ought to be raised by at least 2%-3% of GDP. Also, the less well off, who have seen virtually no increase in their real disposable income for many years, ought to be granted tax breaks, via lower taxes on employment.
The winners of globalisation, including capital owners, would have to provide more resources for such a policy change. In particular, the strong increase in national income allocated to capital has been helped by multinational companies’ use of tax shelters for the booking of disproportionate shares of their global income. The possibility of such assignment of tax liabilities away from production or sales by companies, and similar tax avoidance by individuals, ought to be eliminated.
Second, mainstream politicians need to address nationalists’ key selling point – the issue of refugees and immigration – head on. This debate is confused by misinformation, sometimes aimed at creating fear and resentment. A recent survey by EU Barometer shows that Europeans think the share of immigrants in their country is much higher than it is in reality, sometimes by a factor 2-3. For example, Italians believe immigrants now make up 25% of the population, when the actual share is less than 7%; a misconception fuelled and exploited by Deputy Prime Minister Salvini and the Lega party. Also, while surveys consistently show a belief that immigration has led to significantly higher crime rates, all European countries, as well as the US, in fact now enjoy some of the lowest crime rates in decades.
In addition to providing accurate information via more contemporary platforms, governments need to strengthen their ability to distinguish between legitimate refugees (whose access to Europe remains broadly uncontroversial) and economic migrants. The former group needs help to integrate faster; the latter group needs a process, which either repatriates them quickly and safely, or provides them with a path to residency.
Third, Europe and the US need to update their legal frameworks to match the present world of the internet. This should include laws to make distributors of information and views via the internet legally accountable, at par with the laws long in place for distributors of information and views via the printed press, radio and TV. Free speech will not be jeopardised by laws that secure the right to legally challenge misinformation and defamation of individuals.
Finally, Russian support for nationalist groups and parties in Europe and the US is now well documented. Surely, foreign financial and logistic support for political organisations and groups ought to be outlawed in Europe, as it is in the US. More broadly, as nationalist leaders in Russia, China – and now Hungary – restrict foreign-funded NGOs and educational institutions, liberal democracies may need to introduce national reciprocity requirements for such institutions to operate in Europe and the US.
When fighting to preserve liberal democracies one must tread a narrow path in order not to jeopardise the very parts of these liberal democracies that have made it so successful for the past 70 years. But it increasingly looks like a fight for survival. If sowe at least need to promote a public debate about where the lines should be drawn.
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Four key policies must be worked on to fight nationalism and protect Western democracies, a task that is starting to look more and more like a fight for survival.
