Is the Western Decline Inevitable

It is undeniable that the world has been going through in these very last decades major changes and profound transformations which today are challenging the post-world war II international order.

The first driver at the basis of these changes has certainly been economic. The reduction of trade restrictions and falling costs of transport and communication, brought along through progressive trade liberalization promoted in the WTO framework by the Uruguay round, first, and the ongoing Doha Round then, has certainly boosted economic integration which has risen rapidly worldwide in these very last decades and which has gradually led to the emerging of new economies (which just back to two decades ago were considered as poor developing countries). Indeed, we are assisting today to the rising of new economies (e.g. not only the BRICS countries, but also Turkey, South Korea, Indonesia, Nigeria etc.) – often referred to as “emerging economies”, in terms of their increase of share in the world GDP, per capita income, or trade – which are challenging the global leadership (especially of the economy) of the “West” (US+Western Europe) and demanding for more recognition and, especially, more leadership within it.The numbers of course are more helpful than words to support these statements. Hence, if we look at how the share in the world GDP has been changing during these past decades (according to an FT study on it), we gather evidence for our thesis.

Between 2012 and 2017 we can assume a continuous reduction in the share of advanced economies. Actually, also according to world’s GDP forecasts for 2013 from the October 2013 IMF World Economic Outlook, major contribution to the world’s GDP in 2013 will come from Asia (especially South – East Asia); Africa and to a less extent from South America. By 2030 Brazil, Russia, India, and China’s combined share of world GDP is expected to match that of the original G7 countries. Moreover, by 2035, the BRICS + Indonesia, Turkey, Mexico, Korea, Saudi Arabia and Nigeria are forecast to rank among the world’s top twenty economies.

But when talking about decline, we should not only consider economic factors, but also socio-political aspects. Hence, in order to prove whether the “Western” dominant world which emerged after World War II, and especially after the collapse of the Soviet Union, is really on a declining path or it is just going through a transition phase it is also useful to look back at the historical literature studying an empire’s life cycle, and especially the common features signaling its declining phase. It is generally argued that an empire goes through different stages: (1) beginning/expansion – it gains power and conquers land from others – generally this is the phase when self-confident and self-disciplined spirits believe in a common objective and unite their efforts to achieve it; (2) maturity/consolidation – it stops taking more land and it starts building walls; meanwhile, the empire promotes business investment to build the wealth which leads to the age of intellect and awakening; (3) decline – the age of intellect and awakening brings also skepticism and lack of confidence in intellectuals, which might start questioning or opposing the values and religious beliefs of early leaders; meanwhile, the effects of material success and the growth of wealth and comfort might begin to corrode people, encouraging them to abandon that spirit of sacrifice, self-confidence and discipline which were at the basis of the empire’s creation. Focusing more specifically on the declining phase, a British historian (Sir John Bagot Glubb) in his 1978 book “The Fate of Empires and the Search for Survival” identified common features of an empire’s culture in a declining period, such as: increasing individualism and declines in birthrates; rising pessimism among the people and their leaders – people cynically give up looking for solutions to the problems of life and society and thus they tend to drop out of the system; extensive welfare provided by the government which helps favouring laziness and dependency (the famous “panem et circenses” in ancient roman times were provided by the government to keep the masses content); increasing foreign immigration challenging the cultural dominance and unity of the empire and raising the spectre of divisiveness, if not properly addressed. To a certain extent we might argue that certain seeds of a declining empire can be identified in what the US and Europe, especially after the outburst of the 2008’s global crisis and with the ongoing sovereign debt crisis, are up to today. Other than what is shown by their problematic economic indicators, their societies are facing the burdens of declining birthrates, of increasing foreign immigration and the ensuing multiculturalism challenge, of sometimes no longer sustainable welfare systems (especially in the case of some European countries) and, most importantly, the spreading of a sense of self-pity and defeatism which, unless overcome, might be the most dangerous factor as it might become a self-fulfilling prophecy.

Hence, it is inevitable to state that these overall profound economic and socio-political challenges raise big questions about where the world is heading and, especially, if, given the aforementioned figures, the Western world is bound to decline. Certainly, on the one hand, this scenario raises growing challenges to the Old Order from ambitious regional powers such as China, Brazil, India, Russia, Turkey and Indonesia as they feel increasingly emboldened to test and probe the current order with an eye toward reshaping the international system in ways that reflect their own interests. These “emerging economies” have the ambition (or already possess the capacity, see China) to influence regional and, to a certain extent, global action. This has been clearly shown, for example, by the outcome of the most recent BRICS meeting (March 2013), where the BRICS Leaders agreed, among other things, to establish a New Development Bank, which will be funded with $100 billion (Russia, Brazil and India will contribute $18 billion, while China $41 billion and South Africa $5 billion) and is designed to help finance infrastructure and development projects in the BRICS countries and to pool foreign currencies to forestall short-term liquidity pressures and further strengthen financial stability. The aim of these agreements is to offer an alternative to the WTO-IMF system (often accused by these countries of being “Western biased”), thus favouring the transition to a polycentric economic order. But on the other hand, it is also wise to consider that emerging markets, despite their promising prospects and appealing opportunities for growth, show unique political risk due their intrinsic instability or institutional weakness. Hence, until emerging markets will not be able to provide their populations with stable economic and political systems we could always doubt the sustainability and the long term prospects of their current wealth. There are countries that over the years have been able to post stellar growth rates but what about the sustainability of their pension and welfare systems if their demographic trends continue to grow steeply over the years; what about the endemic corruption they face, the intrinsic idiosyncrasy between the increase in their middle class and their progressive aspiration for more democratic rights over time; or what about the level of public expenditure they have to maintain to guarantee public consent. Hence, as long as a country can guarantee a functioning and prospering economy, its system may continue to thrive as China shows. However, as soon as it is not able to sustain its system, over the long run, discontent may become so strong to challenge it. Moreover, despite widespread belief in a decline of the West, the statistics show that Western countries remain overwhelmingly pivotal, both as for mutual cooperation and as for the world economy. The G7 countries, indeed practically all the OECD countries, have a profound underlying unity. Unlike emerging countries, western economies have similar socio-economic structures and societal interests. This is why the deep European integration, and the more loosely organized but still substantively deep integration of the trans-Atlantic arrangements, have occurred within the OECD space. On the other hand, it is no coincidence that they are also taken as examples and models by new upcoming regional organizations (eg. see the project of the Eurasian Union).

Overall we cannot deny that especially since the outburst of the financial crisis in 2008 and the ensuing sovereign debt crisis, the US and Europe are going through very difficult times which are challenging their political and economic stability. But, on the other hand, it is also true that risk means also opportunity. But to seize these opportunities the West should remember what drove its success, rather than mourn its relative decline, in order to find ways to rediscover the alchemy itself. Hence, analysts tend to refer for example to the “seven pillars of Western wisdom”,as successful driving factors which have contributed, and continue to do so, to the world’s human development: free market economics; science and technology; meritocracy; pragmatism; culture of peace; rule of law and education. And, specifically on the “culture of peace”, we must acknowledge that the fact that today (after the two World Wars and the Cold War dominating the 20^th century) war between Western great powers appear increasingly inconceivable (which might not totally be the case in respect to China and Japan) is “one of the most impressive accomplishments in human history”. It has in fact been powerfully argued that, despite conflicts in the world have not ceased, the recent “decline of violence may be the most significant and least appreciated development in the history” of the human race. On the other hand, coming back to economic issues, the rise of new markets means also that of hundreds of millions of new middle class consumers with the inclination and the purchasing power to shop for the high value products that the “West” is good at making. In this perspective, it is also important to consider that as for the European Union, for example, although  growth is projected to be slow, with its $16 trillion economy and a GDP per head of €25,000 for its 500 million consumers, the EU not only is the largest economy in the world but it has also emerged as the largest trading bloc in the world, which opens up very important opportunities (it is no coincidence that as of today the European Commission has developed an ambitious bilateral trade agenda, see box below) as trade can also prove a powerful engine for growth and job creation in Europe. Figures confirm that the EU is the world’s largest importer and exporter, as well as the largest trading partner of all five BRICS Countries and the largest host and recipient of foreign direct investment. All this means that Europe is well placed to seize the opportunities offered by the growth of these economies, provided that their markets are open to international trade and foreign investments. As a matter of fact, compared to 2006 when only a quarter of EU trade was covered by Free Trade Agreements (FTAs), the EU Commission has developed an ambitious bilateral trade agenda which, with the opening of negotiations for an agreement on a far bigger scale with Japan and possibly with the US, would bring the figure to two-thirds of EU external trade. Moreover, these negotiations could boost EU GDP by more than 2% or €250bn and support an increase of more than 2 million jobs related to trade across the EU.

Hence, it is true that the emergence of new economic powers (BRICS, MIST etc.) on the world stage is leading to a new balance of power. But it is also not automatically true that if power rises on one part of the world it must by definition decline elsewhere. This means that the “West” has the liberty to do reverse the cycle of decline but, in order to do so, it must learn from its mistakes and capitalize and work on its strengths. From a political and social point of view, this also means going back to the spirit of discipline, sacrifice and unity which drove success in the past and reverse the cycle of self-pity and pessimism which lead people to drop out of the system and give up their responsibility in working for a better future.