“History doesn’t move in a straight line,” US President Barack Obama said following his talks with Prime Minister Alexis Tsipras in Athens last week. He expanded on this theme during his speech at the Stavros Niarchos Foundation Cultural Center, drawing attention to the disconnect that some voters feel as a result of economic policies failing to deliver – an issue that has become hard to ignore in the wake of Brexit, Donald Trump’s victory in the US and the rise of populism in Europe.
“The same forces of globalization and technology and integration that have delivered so much progress, have created so much wealth, have also revealed deep fault lines,” said the outgoing American president.
Providing a succinct analysis of how the breakdown has occurred, he said: “Technology and automation mean that goods can be produced with fewer workers. It means jobs and manufacturing can move across borders where wages are lower or rights are less protected. And that means that workers and unions oftentimes have less leverage to bargain for better wages, better benefits, have more difficulty competing in the global marketplace.”
Obama went on to stress that the inequality caused by the divergence in people’s economic fortunes is “one of the greatest challenges to our economies and to our democracies.”
“An inequality that was once tolerated because people didn’t know how unequal things were now won’t be tolerated because everybody has a cellphone and can see how unequal things are,” he explained. “So not only is there increasing inequality, but also there is greater awareness of inequality. And that’s a volatile mix for our democracies.”
The feeling of missing out on the economic benefits others enjoy due to the spread of technology, free trade and the financial deregulation that allowed large cross-border capital flows has jolted the political landscape and shaken politicians and commentators. Over the last couple of years, we have seen the election of a previously insignificant radical left party in Greece last year, the rise of the far-right in central and northern Europe, the adoption of authoritarian rule in parts of eastern Europe, Britons voting to leave the European Union and now a multi-millionaire with no governing experience being elected president of the US despite insulting all and sundry during his campaign.
“What elites have forgotten, or failed to communicate, is that openness and free trade do not automatically raise all boats,” University of California professor Barry Eichengreen told Bloomberg TV earlier this month.
“There are winners and losers from globalization. The losers are left behind and if they’re not helped, not compensated, if they’re not provided with a basic income or the education and training they need to compete in a globalized economy they will, understandably, grow resentful. I think many of our policymakers, starting with proponents of the single market in Europe, extending to the advocates of the Trans-Pacific Partnership have forgotten and not acknowledged that there are losers as well as gainers and that we need to do something for the losers.”
This seemingly seismic shock to our political normality has prompted a debate about whether we are witnessing the collapse of the liberal democratic order, which has been underpinned by the capitalist economic system. Greek Finance Minister Euclid Tsakalotos was drawn into the discussion last week, when he was asked by the Wall Street Journal whether what is unfolding before our eyes is the beginning of the end for the West.
The Greek minister gave a sanguine response.
“If you think about the promise of globalization in the years of [Tony] Blair and [Bill] Clinton, it was that only people in old industries like textiles or steel have something to worry about. But it became very obvious that in fact many middle-class people had a lot to worry about,” he said. “There is a threat to wages and prosperity and security that is more widespread and I think that the center, the center-left, and the left have been actually rather poor in responding to that.”
Tsakalotos also weaved this broader context into his comment on the current negotiations with Greece’s creditors. One of the key obstacles to concluding the second review of the adjustment program are the demands from the lenders – primarily the International Monetary Fund – to conduct further reforms to the labor market, such as increasing the ceiling on collective dismissals. Tsakalotos argued that Greece has already liberalized the labor market enough and that any further steps in this direction would risk leaving workers so exposed they would turn to extremists for political succour.
“This is a decision about the power of capital and labor in society, and you cannot weaken labor further, especially when there is 25 percent unemployment,” he told the newspaper, according to an annotated transcript of the interview.
“If the workers do not see that they are participating in the benefits of growth then we will get a lot more right-wing populists. If Greece is going to survive and come out of this crisis with some kind of social consensus, then in the upswing the working class and middle class must feel that they are participating. It can’t be that they have made sacrifices and now all the benefits will be going to capital.”
It seemed good timing that in the week this international debate about the dangers of inequality should land in Greece along with Air Force One that Germany’s Bertelsmann Foundation released its annual Social Justice Index. As in 2015, Greece came last out of the 28 European Union countries in terms of social justice, scoring 3.66 points against an EU average of 5.75 and a high of 7.51 in first-placed Sweden.
The index encompasses six categories: Poverty prevention, equitable education, labor market access, social cohesion, health and intergenerational justice. Greece scored extremely poorly in all categories apart from education. The report labels social justice levels in Greece “shockingly low.” The authors also point out that the gap with Romania (27th) and Bulgaria (26th) has widened since last year because poverty rates in those countries fell whereas the Greek one remained unchanged. In Greece, more than a third of the population is at risk of poverty or social exclusion.
Maybe it is a timely reminder, as we struggle to see beyond our small and intense universe of bailouts and political clashes, that when history changes direction the line does not always skirt us by; sometimes it runs right through our corner of the world.