A New World Order

It is a common human emotion, especially in difficult periods in our lives, to look for a return to simpler times. We all have this idealised picture of when things worked, the world was in harmony and life was easier, and the more our current life is full of challenges and stress, the more we yearn to return to a calmer state of affairs we call “normal”.

Actually, this is something of a misnomer. Life was seldom as simple as our rose-tinted memories would suggest, and while 2022 is replete with its stresses and challenges – inflation, energy shortages, transport woes, a health system in crisis – it is not obviously that much more stressful than 2020 when the pandemic started, there was not yet a vaccine and nobody knew how many millions would die … or 2018, when the never-ending saga of Brexit just could not be solved … or 2016, with the huge divisions in the country the referendum uncovered … or 2014, when the unity of the UK was at risk in the Scottish referendum … or 2008, when the financial crisis seemed to overwhelm us. Life is stressful, it always has been, and there never has been a “normal” or “simpler time” for us to return to.

And yet there is something about the world today which suggests we might be on the cusp of significant change. Indeed, I would go further and suggest we might be seeing the start of a New World Order, a new geo-political structure for the world.

What do I mean by this?  As a start, let me describe the World Order we are familiar with, indeed that we have all lived all of our lives with.

It is a world of formal structures – the United Nations, the IMF and World Bank, the WTO. It is a world dominated by capitalism and the dollar, and a belief in the value of globalisation, a belief that removing barriers between people is better than putting them up. It is a world of plenty and on the whole, increasing prosperity. It is above all a world of peace – wars certainly still exist, but (if we are honest) we consider that they happen to lesser countries and in the poorer regions of the world. They don’t really affect Us.

I suggest that every single part of this world picture is now under great stress, and that nothing I have listed is guaranteed to survive this decade.

And furthermore, I suggest that the strains and stresses have been growing for some time. Yes, Russia’s invasion of Ukraine has brought many things to a head. But it is not the cause of the world’s problems. It has merely moved the world and its issues from a chronic state – chronic in the sense of an ongoing sickness – to an acute state.

Let me start with the United Nations. When the UN was established it was seen by its more starry-eyed supporters as a sort of world government in making. That was always over‑ambitious, but there were certainly hopes that it would be a democratic and effective forum for discussions between states and the resolution of inter-state disputes.

But the blunt truth is that it is neither democratic nor effective. The General Assembly holds votes … and is ignored. The Security Council also holds votes … and is routinely held hostage to vetoes from the 5 permanent members. That was a problem when the five merely disliked and disagreed with each other; now that one is overtly hostile and a second very nearly as openly antagonistic, it is a recipe for stalemate and irrelevance. And it has no answer at all to illegal actions committed by one of the five.

There is a precedent. The League of Nations was set up after the Great War to resolve inter-state disputes and make wars between states redundant. It failed when it had no answer to Mussolini’s invasion of Abyssinia in 1935, and long before the Second World War signed its formal death certificate it was totally moribund.

In observing the UN’s response to Russia’s actions in Ukraine, one might ask how things are different this time round.

The next thing I listed that we have all become familiar with is capitalism, globalisation and prosperity. We largely take it for granted that capitalism is good, that globalisation is good, and that we have a right to expect not just prosperity but increasing prosperity.

Actually, all of that can be challenged. Capitalism is a great way of generating wealth, perhaps the best way of generating wealth we have ever invented. But it is not good at sharing wealth; indeed the motto of capitalism might almost be “to him who hath shall more be given”.

Capitalism has to be harnessed, has to be controlled, has to be set in a social structure that enables society to force the wealth distribution that capitalism on its own does not. And those social structures have been weakening for some time now.

The GDP of the United States is several times what it was in 1990. But in the last 30 years, all of that increase has gone to an increasingly small sector of society – the top 10%, and the lion’s share of that to the top 2 or 3%. The average American is no better off than his or her parents were, and arguably, with their insecurity of employment, expensive accommodation and inadequate health cover, not even as well off as Mom and Pop were.

Is the UK that different?  Have you asked your children recently?

The fond belief that capitalism makes everyone better off has been fraying, and in too many countries simply not true, for some time. And our current cost of living crisis is exposing that with brutal effect.

Ten years ago an increase in the price of global food caused weaker poorer countries severe challenges. We in the West didn’t really notice it much, but it led to the Arab Spring, an uprising of populations who could no longer afford to eat. As food and fuel prices increase sharply again all over the world, I fear we will see a similar uprising of the poorer elements of society – only this time it won’t be just the developing world where people are squeezed, but also the middle‑income countries – Argentina, Turkey, South Africa, even parts of Europe.

When Argentina suffered its currency collapse in 2002, it became a test case for examining the un-middle-class-isation of a country. There are no hard and fast rules on what makes people middle class, but economists suggested that among the indicators were such things as the ability to buy food without worrying about its affordability, the ability to eat out regularly, the ability to afford to run a car, the ability to go out to entertainment (cinema, theatre, etc), and the ability to take foreign holidays.

By those measures, over 40% of Argentines in 2000 could manage all 5 and were clearly middle class. By 2004, that number had fallen to well below 20%. A quarter of their population simply stopped being able to afford a middle-class lifestyle.

What about us?  I wonder what the picture was for the UK say 3 years ago, and what it will look like in a year’s time. Living standards are fragile in far more countries than we realise, even here in the UK, and large sections of our society are closer to poverty than our leaders want to admit.

And this will increase the pressure on our democracy too. The combination of the masses getting poorer while the elite prosper on the one hand, and universal suffrage on the other, is not a stable one:  either the elite will curtail the masses’ right to a meaningful vote, or the masses will use their votes to curtail the elite’s right to exist.

It has happened before – it is how revolutions start – and many see the wave of populism that we have seen in several countries, the US and UK among them, as warning signs that it may happen again. Not “that it will happen again” – but our leaders need to be aware that it may.

What about globalisation?  The mantra that trade benefits all participants, and the more the world trades the richer it gets, is a core belief of economics and in general it remains true. But it is only half the truth – it says nothing at all about resilience, and the reliability of a system built on global trade. And we have learnt a lot about that in the last two years, through stops to world trade caused by the pandemic, shipping hold-ups and sanctions on Russia.

Put simply, we are learning afresh to value the security of our imports, especially our food and energy supplies, not just their cheapness. Capitalism is extremely good at identifying the cheapest, most efficient way to do business, and that has led to globalisation on a scale not seen before. It is not so good at identifying the most secure, the most reliable business model, because security cannot so easily have a dollar price put on it. And right now, the importance of security of supply is rather more apparent than it was.

The US is self-sufficient in both food and energy. The EU is self-sufficient in food but not energy. The UK is not self-sufficient in either. In the new world order, this factor will I suspect rank rather higher in No. 10’s thinking than it has hitherto.

And so to the last element of our world we have all come to take for granted. Peace. Our view of the last 75 years is inevitably coloured by the huge change in Europe – historically by some ways the most warlike continent, but since 1945 one of the most peaceful, as first of all in the 1950s France and Germany buried their differences, and then in the 1990s, East and West Europe did likewise.

But the differences are still there – the word I used was buried, not abolished. They revolve around how to deal with the threat from Russia, how to deal with immigration from North Africa, how to deal with militant Islam, how to deal with social change. All of these have been brought closer to the surface by recent events. And all can still generate tensions.

And this is without even considering China, and its move from an attitude of disrespect for the ways of the Western world increasingly to one of hostility and opposition.

Let me summarise by lifting the discussion from the immediate and considering the wider, longer perspective. What will the historians of the 2060s think of the 2020s?  What broad brush description of this decade will they come up with?

I suggest that they will look back and think that this was the decade in which

The UN, IMF and WTO completed their move to irrelevance and made possible their abolition;

>  The need to secure essential supplies, to make countries more resilient, rose in prominence in state policy-making, with an increase in autarky in the world;

The globalisation of trade went into reverse and “onshoring”, or more generally “friend-shoring” (trading only with those one trusts) became the norm;

>  The concept of the “peace dividend” from the end of the Cold War was finally abandoned, and countries began to increase defence spending sharply;

>  The general prosperity of the post war era went into reverse – mildly so for most countries perhaps, but for some countries sharply so;

The divide between relatively egalitarian countries, which kept their democracy, and relatively unequal countries, where democracy suffered, became more obvious.

A lot of people have looked at the UK’s inflation, our weak economy and the risk of stagflation and have worried about whether we are returning to the 1970s. I don’t think we are. But there is a more dangerous prospect, that we are instead returning to a version of the 1930s. That was a dreadful decade, a decade of nationalism, autarky, military adventurism, unemployment and the retreat of democracy.

It will take statesmanship to avoid this. I hope the world’s leaders are up to it.