Nationalism, Internationalism and New Politics

A new political dichotomy is replacing the old left vs. right divide.

By George Friedman


The world is experiencing a shift from the old liberal-conservative model to an internationalist-nationalist model. Nationalist challenges against the internationalist model have moved from the margins of the political system to the center, winning victories in the United States and the United Kingdom, and rising in strength in other countries. The rise of nationalism is the decisive character of the day. Internationalism is on the defensive. Whatever the ultimate outcome, this struggle will politically define at least the next decade.

The world that emerged from World War II was built on certain assumptions. First, that the origins of the war rested in the rise of nationalism in Germany and the inability of other countries to form an effective and proactive alliance to contain German and destroy the Nazi regime. Second, the economic crisis that preceded World War II was rooted in the collapse of international trade due to protectionism. In the U.S., this was represented by the Smoot-Hawley tariffs.



Protesters who oppose arrivals of buses carrying largely women and children undocumented migrants for processing at the Murrieta Border Patrol Station yell at counter-demonstrators on July 4, 2014 in Murrieta, California. David McNew/Getty Images


These assumptions framed the post-war world and the Cold War. The U.S., as the leading non-communist power, followed a strategy of containment against the Soviet Union, stretching in an arc from Japan to Norway. The U.S. forged a complex alliance structure whose goal was not to repeat the mistakes of the 1930s and at least contain the Soviet Union, rather than wait for war to begin on its timetable. To maintain this alliance structure, vibrant economies were necessary, both to allow allies to devote resources to their militaries and to demonstrate to the world the superiority of Western capitalism. Economic development depended on economic cooperation and increasingly free trade.

The U.S. pressed for European integration, liberalized trade and multinational economic entities like the International Monetary Fund and the World Bank.

World War II was seen as revealing the dangers of nationalism and the necessity of international cooperation. What emerged was an internationalist system that wanted to see increasing political, military and economic integration in the West. Internationalism became a moral imperative, not simply a national strategy.

With the collapse of the Soviet Union, all of the internationalist assumptions appeared to be validated. The West had defeated the Soviets because of superior military and economic systems produced by international integration. From 1991 until 2008, the internationalist ideology became a global orthodoxy. The greater the interdependence among nations, the greater the common interest and the lesser chance for conflict. The greater the integration, the greater the prosperity, and the greater the prosperity the more inclined nations would be to behave as liberal democracies and respect human rights.

What began as a lesson learned from World War II and a prudent response to containing the Soviet Union became a moral orthodoxy and a moral imperative. In many ways it buried political distinctions. All major parties were internationalists. Some marginal reactionary elements may have bucked the orthodoxy, but on the whole, conservative advocates of the free market and liberal advocates of social justice embraced internationalism. The former saw it as a path to prosperity through trade. The latter saw it as increasing standards of living and creating international standards for internal political behavior.

The distinction between left and right eroded, with social issues taking precedence over economic and strategic issues between the factions. Abortion and multi-culturalism, for instance, divided political parties. Different countries had different emphases, but the doctrine of internationalism dominated the world (except on the margins). Even those that were not going to be liberal democracies, like China, valued the trading system and depended on it. And Westerners believed that if the Chinese had iPods, they would inevitably become like the West.

The love of internationalism permeated all levels of society, but it particularly moved business.

The period from 1991-2008 was what I call “the giddy springtime of the bourgeoisie.”

Spring is a season and it ends. In 2008, the underside of interdependence showed its hand.

Capitalism is prone to financial crises, and one occurred in 2008. In a nationalist environment with barriers between countries – from tariffs to currencies – a financial crisis in one country has the strong potential of being moderated in other countries. The crisis of 2008 tore through the world. The highly integrated banking system, designed to facilitate the free flow of capital and therefore international efficiency, facilitated the free flow of a contagion. The system had lost its ability to protect against contagion. What had been the vehicle of the internationalist spring turned into a multinational disaster. Between financial integration and deep dependence on foreign markets, the contagion savaged Europe, crushed the world’s appetite for Chinese products and ultimately undermined the market for oil. The effects of 2008 are still far from contained.

The 2008 crisis clearly revealed the core weakness of the interdependent system. But the very success of interdependence had been gnawing away at the system for decades. It is true that barring serious malfunction, intensified international integration can increase economic growth on the whole. But human beings cannot make a living off economic growth “on the whole.”

Economic growth that tends to benefit one class while leaving other classes poorer than they were before inevitably creates the foundation for political crisis. These problems were not clearly visible until 2008. After 2008 and the decline in economic benefits of internationalism on the whole, the problem of classes and nations came to light. The decline of some classes, such as those that worked for businesses that moved their production elsewhere to take advantage of lower wages, was clearly visible as the tide receded. Some nations, such as those in southern Europe, discovered that economic integration was not so much an opportunity as it was a prison.

It was discovered that with interdependence and integration, individual nations had lost control over their destinies. An impersonal system that seemed to be uncontrolled determined the fate of nations and their populations. It also was discovered that the idea that nations were obsolete might be true for elites, who followed capital where it went, but being Greek was very different from being German, and being Chinese was very different from being American. The nation mattered because where you lived determined how you would experience life. And that experience gave you far more in common with your countrymen than with foreigners. Greek bankers and German bankers may live similar lives. But Greek carpenters and German carpenters don’t.

The year 2008 did not simply reveal the underlying weaknesses of the internationalist position, it also generated a nationalist counter-response. The counter-response was deeply resented by those who continued to be enamored by internationalism, but they had a freedom of movement that their countrymen didn’t. Those below the median income and those who lived in shattered countries were not going anywhere. They were trapped in a reality about which their government could do nothing.

The international system was hurtling forward to a frightening and unknown destination. The comfortable ones assumed they would do fine. The uncomfortable ones knew for a fact they wouldn’t be. And they knew that whatever solutions would come would not be a massive global redemption where everyone wins. It would be a hard-fought battle among their own.

This was the crucial shift. It was a shift from thinking in terms of humanity as a whole to a focus on those with whom they lived and the things and people they loved. As their states lost any relevance to the lives they lived, they turned toward nationalism, to the love of one’s own and the shared fate with those who were like them. This meshed with the cultural. Over the years, the argument had been made that national cultures and practices were irrelevant. It was the ideology of internationalism that mattered, an ideology that deplored all distinctions.

Distinctions of ethnicity, religion and nation were the hangovers of the catastrophic world that had led to the rise of Hitler.

What followed was an attempt by the internationalist state to suppress what it saw as parochialism, and what those who had benefited least from internationalism saw as the fabric of life. The critical point came with immigration, a global phenomenon. Immigration hit both an economic and cultural chord. From the internationalist perspective, we are all part of one humanity. From the standpoint of the rest, the flow of immigration threatened to shatter the cultural foundations of their lives, as well as put further pressure on their ability to earn a living.

But the most jarring outcome was their government’s indifference to this. The flow of migrants required flexibility in culture and a willingness to help out. But for the Greeks, or the lower-middle class in the U.S., it represented a burden placed peculiarly on them. Well-to-do bankers would not live in communities torn by ethnic strife, but those who had already been stunned and buffeted by cultural change would. These were the people least able to endure it.

The result is that throughout Euro-American civilization, the political divide has ceased to be between the left and the right. The new dividing line is internationalist and nationalist. The debate is between those who regard what is now the old system of alliances, mutual responsibility, free trade and transcultural life as essential, and those who regard a globalist perspective as incapable of addressing the vast variability of nations, cultures and classes.

The question now is whether the dominant political and moral culture of 1945-2008 represents the future or whether it is the past, and a failed past at that. It has been 70 years since 1945, and 70 years is a very long time. The world has changed dramatically since the fundamental principles of the post-war world were laid down. As with all ideologies that have been in power so long that people assume they are the only reasonable approach, an inflexibility has set in.

With that inflexibility, internationalism has become vulnerable to challenge by forces it can’t take seriously.

Internationalism simply doesn’t see the next punch coming. And when the punch lands and internationalism staggers, its first impulse is to declare its contempt for the bad manners of the nationalist.

The battle is in the first stages, but it is a battle that was inevitable. The world is vast and humanity is an abstraction. My place in the world, my town, my culture and my nation are conceptually more manageable. The core principle of liberalism is the right to national self-determination. The instruments of internationalism – alliances, trade agreements and international law – run counter to the principles of national self-determination. They ignore the nation and the right of citizens to govern their nation.

As in all things, the issue is not simple. Internationalism has been dramatically successful in enriching the world since World War II. Its problem is that nationalists charge that only part of the population has enjoyed this wealth, and there are things more fundamental than wealth such as cultural identity and differences. Internationalism is tone-deaf or hostile to cultural identity, which is its weakness. Nationalism has not yet defined the limits of national enclosure.

This has a long way to go. But looking back, it is no surprise that the Republican and Democratic parties are in utter disarray in the U.S. The points of reference they have represented and the dogmas that have driven them have not disappeared, but are forming around the new points of reference: nationalism and internationalism. Neither party knows what to do with those poles. Nationalism may not simply triumph, but internationalism cannot simply stay the way it is.

Marine Le Pen looms over a Trumpian world

French presidential election will pit far-right leader against establishment figures        

by: Gideon Rachman

Donald Trump and the Sense of Power

Robert J. Shiller
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Why populism is in retreat across Latin America
 

WHEN Latin Americans contemplate Donald Trump many think they have seen his like before. Only a few years ago populist nationalists exercised voluble sway over the region’s politics, from Venezuela’s Hugo Chávez (pictured) to Cristina Fernández in Argentina and Rafael Correa in Ecuador. Now Chávez is dead, Venezuela is in crisis; Ms Fernández is out of power and faces corruption charges that may land her in jail; Mr Correa has opted not to run for a fourth term next year. Bolivia’s Evo Morales, who has populist tendencies, was defeated in a referendum this year that might have allowed him to remain in power until 2025. Even as populism is on the rise in Europe and the United States, it is in remission in Latin America.

Why?

Populist-nationalist strongmen have been a feature of the region’s politics since Argentina’s Juan Domingo Perón first came to power in the 1940s. Some have been nominally of the left, others of the right. All posed as saviours of “the people” and railed against “the oligarchy” or “imperialism”, in terms analogous to the political insurgencies of Mr Trump and Nigel Farage of Britain’s UK Independence Party against the “establishment”. They tended to ignore checks and balances on their rule, and to blur the distinction between leader, party, government and state. Their emergence owed much to Latin America’s extreme inequality of income and wealth, just as populism in the rich democracies has been stimulated by a rise in income inequality. In a region where labour unions were relatively weak, populism emerged as a route by which the swelling urban masses were brought into politics. To maintain their bond with “the people”, populists were often spendthrift. As inflation eroded wage increases, they did little or nothing to reduce income inequality in the long run.

The resurgence of populism in Latin America in the 2000s owed much to the economic stagnation and financial crises that hit the region in the late 1990s. Chávez and his ilk were extraordinarily fortunate to be in office just as the great commodity boom driven by China’s industrialisation took off. With plenty of revenues to distribute, they were popular. Now the money has run out. As China’s economy slows and rebalances towards consumption, Latin America is suffering its sixth successive year of economic deceleration. Because of the fiscal irresponsibility of their populist leaders, Venezuela, Argentina and Ecuador are all in recession.

In several countries corruption has added to the desire for political change. 

After a long period of domination by the left, both populist and social democratic, in South America, the pendulum has swung back to the centre-right. New governments in Argentina, Brazil and Peru, for example, are keen on closer economic ties with the United States. For Latin America, the timing of Mr Trump’s victory could not be worse—at least if he implements his promise to retreat from trade agreements and impose protective tariffs. Populism has not disappeared altogether from Latin America. The chances of Andrés Manuel López Obrador, a veteran populist, in Mexico’s presidential election in 2018 may improve if Mr Trump tears up the North American Free Trade Agreement and builds his promised wall along the border. But in many countries populism is on the wane. Liberal democrats have a chance of keeping it that way, but only if they do the hard work of boosting productivity and competitiveness that is needed to restore faster economic growth and maintain social progress.

Three Big American Banks Pose Greater Systemic Risk, Regulator Says

By CHAD BRAY

This Is Where I Get Off

by Jeff Thomas
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We began writing on the War on Cash some time ago, when it was still just a theoretical ploy that we believed banks and governments were likely to employ as their economic adventurism continued to unravel.

But, in the last year, several countries have, as a part of the War on Cash, begun removing larger bank notes from circulation in order to force people to perform all economic transactions through the banking system, ensuring that the banks would gain total control over the movement of money.

Of course, the banks could not admit their true goal to the public. They instead used the governments to claim that the measure was being undertaken to restrict crime (money laundering, drug deals, black marketing, terrorism, etc.).

Recently, without any fanfare, ATMs in Mexico have ceased issuing the 500-peso note (US$24).

The largest note is now the 200-peso note (US$10).

At about the same time, Citibank in Australia declared that it will no longer accept coins or banknotes.

India has joined those countries that have done away with larger notes. They did so quite suddenly, and the effects are already being felt by the Indian people. The elimination of the 500-rupee and 1,000-rupee notes has, of course, not limited the level of spending in India, but it has caused a sudden demand for considerably more smaller notes through which to accomplish the same transactions.

A problem with the removal surfaced immediately when people using ATMs were withdrawing far more notes than ever before in order to have enough cash to function normally. The ATMs were quickly being emptied of the smaller denominations. The people of India cried foul, as 86% of all money in circulation had vanished from the system overnight. The limit for withdrawal per day is 2,500 rupees (US$37) – which for some is sufficient to pay for daily expenses, but is most certainly not sufficient to carry on a business or facilitate larger transactions.

Although deliveries of notes to the ATMs has increased, the banks simply cannot make up for the sudden loss of 86% of the nation’s money. Not only can the delivery trucks not meet the demand, the machines cannot store the volume of notes needed.

The result has been a partial breakdown of commerce. With millions of people beginning each day with insufficient funds to function, one byproduct of the money shortage is that over 9.3 million trucks have simply been abandoned by their drivers. (Nearly two-thirds of all freight in India moves by road.)

In January of 2016, we published an article that made reference to the turning point of World War II on the Western Front. Although the German war machine was collapsing, a major last-ditch effort was made at the Battle of the Bulge to reverse the tide of the war. German tanks raced to the battle and might well have made the Germans the victors, but they ran out of gasoline along the way.

The crews, understanding that the game was well and truly over, simply left the tanks and began to walk back to Germany. The great significance of this event is that, no matter how much bluster a political or military leadership presents, and no matter how obediently the soldiers respond to such posturing, once it’s clear that the game is up, the pretense amongst the soldiers evaporates.

The same is true in commerce. When those who make the decisions in banking and government try to game the system one time too many, dysfunction sets in and the “soldiers” – the countless minor participants in the system – simply walk away.

The lesson to be learned here is that, in all countries where a War on Cash is being destructively waged, the end will not be a positive one. The people of each country will increasingly become unable to function normally, as in Greece, where there have been riots due to the banking squeeze.

Banks and governments have colluded to tie up wealth in order to have their hands on as much of it as possible as they grow nearer to economic collapse. As the situation drags on, their intent is becoming ever more transparent to those who have to suffer the difficulties caused by the squeeze.

But, as difficult as it may be to accept, these are “the good old days.” The direst events to come have not yet begun to surface.

As I’ve mentioned in past articles, the problem reaches its nadir when trucks that move the country’s food come to a halt. As long as sufficient food remains available to us, we treat it as just another commodity. But unlike clothing, hardware, vehicles, etc., when our source of food is cut off, even for a very short period, we become frightfully aware that its level of importance is far beyond that of any other commodity.

It’s been said that the average person abandons his moral inhibitions after three days without food. After this time, an otherwise morally responsible man is literally prepared to kill his neighbour for a loaf of bread.

To date, none of the countries that have declared a War on Cash has yet experienced a food panic. It would not be surprising if India becomes the first, as their trucking problem has them on the edge already.

However, it’s ironic that the War on Cash problem is most pronounced in what was called “the free world” only two generations ago. Many of those countries that we’ve come to regard as being both prosperous and “safe” are becoming less so with great rapidity.

Small wonder, then, that an increasing number of people are exiting these once choice jurisdictions and seeking those that are not similarly in economic decline. Although we cannot predict how far the elimination of cash will spread, the further you are from the epicentre of the problem, the greater your chances of coming out with your skin on.

The trick, of course, is to say “This is where I get off” well before (as we are beginning to see in India) the driver himself has abandoned the bus.