Turning Points

 2012 in review


WE yearn for turning points. Just as economists have predicted nine out of the last five recessions, so journalists have surely reported nine out of the last five revolutions. Every election is hailed as epoch-making. Every president is expected to have a new foreign policy “doctrine.” A minor redesign of a cellular phone is hailed by the devotees of the Apple cult as a “paradigm shift.”

The point about paradigm shifts, as Thomas Kuhn pointed out in “The Structure of Scientific Revolutions,” is that they don’t happen every other year. They are slow, because even when a new insight is right — dazzlingly right in hindsight — vested interests and other forms of inertia resist its adoption. The same is true for big political discontinuities. They just don’t happen that often.

In 2012 there were a whole bunch of elections, not only in the United States but also in France, Mexico, the Netherlands, Russia, South Korea, Taiwan and Venezuela. In China a new standing committee of the Politburo was named, after a selection process so opaque as to be papal.

In countries like Egypt, Libya and Yemen, there was no mistaking the revolutionary character of the change as the misnamed Arab Spring continued its evolution into an Islamist Winter. But in other places the political changes hardly qualified as turning points. In France a jaded Left mounted one last feeble rally against economic reality. In Mexico the old regime, in the form of the Institutional Revolutionary Party, returned to power. Contrary to expectations, anti-European populists lost in Holland and the genial Mark Rutte was re-elected. In Russia, Vladimir Putin abandoned his pretense of being prime minister and returned to his real job as president. Turning points? Turn over and go back to sleep.

The great English historian A.J.P. Taylor said of the year 1848 that “German history reached its turning point and failed to turn.” This verdict could in fact be applied to most countries in most years.

History is like an oil tanker. It does not turn on a dime. Mankind sails forward through time in seas that are sometimes calm, sometimes stormy. At times it seems almost becalmed, at other times it can do 12 knots. Depending on who captains the ship, it veers sometimes to port, sometimes to starboard. When it changes direction, the turn is generally slow.

The things that change suddenly on an oil tanker are the emotions of the crew. Nine hundred and ninety-nine days out of a thousand, they obey their orders and do their work. But very occasionally there is a drama. The men mutiny and the captain is clapped in irons. Or pirates board the ship. Such events are what historians love to study and call “revolutions.” Still, the ship plows onward.

In other words, do not expect 1989 to happen every year — and don’t exaggerate how big a turning point even 1989 was. Nearly a quarter of a century ago, Francis Fukuyama hailed “an unabashed victory of economic and political liberalism… the Triumph of the West.”

It seemed so true. Who could forget the thrill of that night — Nov. 9, 1989 — when the Cold War ended not with Armageddon but with a street party? Yet, as I write, the People’s Republic of China is poised to overtake the United States in terms of gross domestic product (adjusted for differences in purchasing power) in 2017. If you invested in the West in 1989 you fared much worse than if you had invested in the Rest. Emerging stock markets have risen by a factor of five since 1989; the U.S. market, fourfold; Europe, less than threefold.

One attractively simple way of thinking about the world is to say that wealth, and with it power, are shifting from the West to the Rest. In that sense, the real turning point was not 1989 but 1979, the year Deng Xiaoping visited the United States and China’s economic reforms began in earnest. From that point, the “great divergence” of the West from the Rest came to an end, and the world embarked on a “great reconvergence.”

 The Six Drivers of Historical Change

But the reality is more complicated than suggested by phrases like “the post-American world.”

There are six slow-acting drivers of historical change in our time, as in most of recorded history. A common error is to focus on only one. They are:

1. Technological innovation;

2. The spread of ideas and institutions;

3. The tendency of even good political systems to degenerate;

4. Demographics;

5. Supplies of essential commodities;

6. Climate change.

The first three essentially explain why the West has lost some of its predominance. But the others remind us that, in that wonderful line often attributed to Bismarck, “a special Providence watches over children, drunkards and the United States of America.”

Measured (crudely) in terms of international patents granted by country of origin of applicant, the West no longer leads. Japan has been out in front of the United States for nearly 20 years and, in the past decade, first South Korea and then China have overtaken Germany to take the third and fourth places.

Measured (less crudely) with standardized tests of mathematical attainment at age 15, the West has also slipped. In the most recent report, published by the Organization for Economic Cooperation and Development, the gap between teenagers from the Shanghai District of China and those from the United States was as big as the gap between the Americans and their Albanian contemporaries. The silver medal went to young mathematicians from Singapore, the bronze to their counterparts in Hong Kong, then came South Korea, followed by Taiwan. Proficiency at math isn’t everything, of course, but societies that teach the average student so much better than the West does are probabilistically more likely to turn raw genius (which is pretty randomly distributed through humanity) into Nobel prizes.

The third driver of change — nearly always overlooked by political scientists — is the tendency of even the best systems to degenerate as rent-seeking special interests grow on the body politic like barnacles on a ship’s hull, and civic virtue yields to human frailty. Westerners are justly proud of their various democratic systems, and Americans in particular regard their Constitution as the world’s best. Yet every comparative study of institutional quality — from the World Economic Forum’s Global Competitiveness Index to the World Bank’s Worldwide Governance Indicators — tells the same depressing story. In many Western countries there has been a perceptible decline in the rule of law. Among the worst cases are South European “cradles of democracy,” Greece and Italy, which receive shockingly bad scores from the World Economic Forum. In the United States, meanwhile, the World Bank reports marked declines since 2000 in the control of corruption, regulatory quality, accountability and government effectiveness.

This “great degeneration” helps explain the slowdown in growth and productivity we have witnessed in the West in the past decade. We cannot blame it solely on the financial crisis, nor on the fact that (as the economist Robert Gordon recently argued) the information technology revolution has delivered much less than its own hype led us to expect. The world is changing not just because the Rest have got better, but also because — quite independently — the West has got worse. Indeed, much of the developed world today reminds me of what Adam Smith said about China in “The Wealth of Nations”: It has reached a “stationary” state in which growth is near zero and prosperity is enjoyed only by a corrupt bureaucratic elite.

Nevertheless, there are three important reasons why the United States is more likely to escape from this condition of stasis than Southern Europe or Japan.

First, partly because of immigration, partly because of fertility and partly because of inefficient health care, the United States is aging much less quickly than countries like Japan and Germany. By 2050, according to the United Nations, more than a third of Japanese will be 65 or over. For Germany the figure will be 31 percent. Even in China, more than a quarter of the population will be older than 64. But for the United States, the figure will be just 21 percent. China’s labor force will start to shrink in the 2020s. That will not happen in the United States.

 Beyond 2012

Secondly, unlike Europe and Japan, the United States is one of the global Big Five in terms of mineral wealth, with known reserves of fossil fuels and minerals worth at least $30 trillion — more than Australia, Saudi Arabia and China, though less than Russia. In particular, the United States is poised to profit from an energy revolution that has seen shale gas leap from 1 percent of U.S. natural gas production in 2000 to 35 percent today. American natural gas is a quarter the price of East Asian and a third the price of German. The combination of an increasingly competitive labor market and cheap energy is going to spark a remarkable recovery of U.S. manufacturing in the near future.

Finally, as the world warms and climate becomes more volatile, North America will fare better than East Asia. Natural disasters will happen, of course, as Hurricane Sandy reminded us. But there will be more on the other side of the Pacific. Good luck to Asia’s coastal megacities. They will need it.

Already things look better for the United States than for the rest of the West. The I.M.F. projects 2.3 percent growth next year, compared with 1.2 percent for Japan and 0.7 percent for the euro zone. That divergence will persist.

In America, the economic trends toward self-sufficiency and manufacturing recovery may encourage a new phenomenon: liberal isolationism, as the country reverts to its default aversion to “foreign entanglements.” By contrast, Europe and Japan will continue to languish, denying themselves the relief of higher immigration or nuclear power, stagnating under piles of debt that will become harder and harder to finance. In these stationary states, populism will take uglier forms. After more than half a century, European integration may turn into disintegration.

Meanwhile, in the mobile states of the developing (and still growing) world, there will be more bourgeois revolutions, in the classical sense of revolutions against autocracy led by aspirant middle classes. Already, according to Credit Suisse, more than 300 million Chinese adults have wealth of between $10,000 and $100,000, while close to 20 million have wealth above $100,000. These people are discovering that their hard-won private property needs to be protected by the rule of law, and that the biggest threat to that is a corrupt Communist Party, which they are increasingly able and willing to criticize in online microblogs.

In the big emerging democracies — India, Brazil, Nigeria — there is less need for a bourgeois revolution. Indeed, Dilma Rousseff, the Brazilian president, recently declared that she wants “a middle-class Brazil.” In North Africa and the Middle East, by contrast, the bourgeois revolutions have begun. It was in Libya last year that the following graffiti was seen: “We want a constitutional role and for the president to have less authority and the four year presidential term should not be extended.” That is the authentic voice of 1848, though it remains to be seen whether Arabia will truly turn at this turning point.

The American empire-in-all-but-name is leaving the Middle Eastern stage, having dominated the region since the 1970s and — I would argue — having sparked the revolution by toppling the most vicious of the Arab dictators. Now the real contest is between those who would impose a medieval legal order on Arabia, as the ayatollahs imposed it on Persia after 1979, and those who dream of the long-awaited Islamic Reformation, which would allow Muslims to coexist in peace with modernity — not to mention with the state of Israel, modernity’s representative in the region. The choice between the Iranian and the Turkish (or Indonesian or Malaysian) models should not be hard to make. Yet the Arabs may have to endure a period of sectarian warfare before that Reformation can occur.

The hardest question to answer, as the great tanker of history slowly turns, is whether the two dominant powers of the age, America and China, will be able to maintain what Henry Kissinger has called “co-evolution,” or whether they are doomed to re-enact the rise of the Anglo-German antagonism that culminated in world war nearly a century ago. Will it be Chimerica — or what Noah Feldman has christened “Cool War”?

Or blazing hot war? The approaching centenary of 1914 is a sobering reminder that, while elections may come and elections may go, it is wars that change history’s direction most decisively. World War I did not sink the human ship, but it certainly sank the first age of globalization. Should a similar conflict occur in our time, we shall know that world history has reached a turning point. We must hope it will only turn — and not keel right over.

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Turning Points