Edward Luce was so excited by the fall of the Berlin Wall in 1989 that he raced by car to the Brandenburg Gate to catch the debris from the fall of communism. It seemed that nothing could halt the march of Western liberal democracy. Thirty years later it all looks very different.
Donald Trump has shattered the West’s claim to moral leadership of what used to be called the free world. Authoritarian China is about to overtake the USA as the dominant economic and military force on the planet. India is waiting in the wings. What Luce calls “illiberal democracy” is taking over even in EU countries like Viktor Orban’s Hungary.
So, what went wrong? Well a lot of things: stupid wars, complacency, globalisation. But the main message I took from this book is that the dream of liberal democracy was killed by the greed of a narrow caste of plutocrats who exploited its freedoms.
As Luce explains, the working classes in the West have seen their living standards stagnate, or even decline, as standards in India and China have risen. But this necessary global rebalancing has been greatly exacerbated by the astonishing rise of inequality in the West. The top 1% have seen their riches grow exponentially, especially since the financial crash of 2008. Luce estimates that the 1 percenters now posses one third to a half of all wealth on the planet.
The reaction to this “middle class squeeze”,as Luce puts it, has been populist revolts in Britain and America, installing protectionist politicians who promise to halt immigration and “bring the jobs back”. Of course, they’re not coming back. Luce is deeply pessimistic about the prospects for the hollowed out economies of the once dominant West. He believes half of all jobs remaining are at risk from automation as “software eats the world”
Luce has a vivid, aphoristic style which makes this sobering book an engaging read. He describes Trump as a “Ku Klux Kardashian, combining hard right pugilism with the best of postmodern vaudeville”. “The rich” he says “need to emerge from their postmodern Versailles”. He is scathing about the retreat of the left into identity politics: “By giving a higher priority to the politics of ethnic identity than people’s common interests, the American left helped to create what it feared…the awakened whites”.
However, when it comes to giving his own prescriptions for shoring up liberal values, Luce doesn’t have a lot to offer, apart from universal health care, “humane” immigration control and a defence of free speech. Luce does not appear to consider what is surely the most obvious solution to the malaise of the West: redistribution of wealth. If the 1% have managed to finagle the lion’s share of national income and wealth, then surely a properly functioning liberal democracy would recycle much of this back through taxation. But apart from “simplifying the tax system” this Financial Times journalist has nothing to say about tax.
This is a crucial omission. Luce is right that the “centre of gravity of the planet” is shifting East and artificial intelligence is making making jobs redundant. But as he points out, even in this era of stagnation the “US economy produces a third more today than it did in 1998 with the same sized labour force”. Automation is not making us poorer; it is making us richer – it’s just that the rewards are not being properly distributed.
Many of the commentators now pronouncing the Decline of the West share Luce’s myopia about tax. The return of Edwardian levels of inequality is regarded almost as a natural event, as if nothing can be done about it. Yet, in the age of the capitalism’s greatest expansion, in the 1950s and 60s, countries like Britain and American had top tax rates in excess of 80%. This recycled the wealth and allowed the consumer economy to expand in what have been called capitalism’s “golden decades” – before the revival of the neoliberal economics in the 1970’s. It is certainly more difficult to tax wealth in the era of globalisation and footloose money, but it is by no means impossible. Wealth may be more mobile, but people are not, and most of the 1% still live in the Western countries where they made their money.
Capitalism is incapable of realising that this is in its own interests. The historic task of social democracy has been to moderate the free market and prevent society fracturing into extremes of wealth and poverty. This is what politics is for. Since the days of ancient Rome it’s been clear that rampant inequality can only lead to tyranny as the rich turn to authoritarians to protect their wealth from the dispossessed. You only need to look at Donald Trump’s cabinet to see that it is not automation that threatens liberal democracy, but plutocracy.