The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.
BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.
The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.
But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.1
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.
The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.
In the United States, housing prices are now 8% higher than they were at the peak of the property bubble in 2006, according to the property website Zillow. The price-to-earnings (CAPE) ratio, which measures whether stock-market prices are within a reasonable range, is now higher than it was both in 2008 and at the start of the Great Depression in 1929.
As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.
If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterized also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war.
For example, during the Great Depression, US President Herbert Hoover signed the 1930 Smoot-Hawley Tariff Act, intended to protect American workers and farmers from foreign competition. In the subsequent five years, global trade shrank by two-thirds. Within a decade, World War II had begun.
To be sure, WWII, like World War I, was caused by a multitude of factors; there is no standard path to war. But there is reason to believe that high levels of inequality can play a significant role in stoking conflict.
According to research by the economist Thomas Piketty, a spike in income inequality is often followed by a great crisis. Income inequality then declines for a while, before rising again, until a new peak – and a new disaster.
This is all the more worrying in view of the numerous other factors stoking social unrest and diplomatic tension, including
- technological disruption, a
- record-breaking migration crisis,
- anxiety over globalization,
- political polarization, and
- rising nationalism.
All are symptoms of failed policies that could turn out to be trigger points for a future crisis.
.. Voters have good reason to be frustrated, but the emotionally appealing populists to whom they are increasingly giving their support are offering ill-advised solutions that will only make matters worse. For example, despite the world’s unprecedented interconnectedness, multilateralism is increasingly being eschewed, as countries – most notably, Donald Trump’s US – pursue unilateral, isolationist policies. Meanwhile, proxy wars are raging in Syria and Yemen.
Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation. By the logicof the political scientist Samuel Huntington , considering such a scenario could help us avoid it, because it would force us to take action. In this case, the key will be for policymakers to pursue the structural reforms that they have long promised, while replacing finger-pointing and antagonism with a sensible and respectful global dialogue. The alternative may well be global conflagration.
People vs. Money in America’s Midterm Elections
They seek to restore access to a middle-class life by providing decent, well-paying jobs, reestablishing a sense of financial security, and ensuring access to quality education – without the chokehold of student debt that so many graduates currently face – and decent health care, regardless of pre-existing medical conditions. They call for affordable housing and a secure retirement in which the elderly are not preyed on by an avaricious financial sector. And they seek a more dynamic, competitive, and fair-market economy by curbing the excesses of market power, financialization, and globalization, and by strengthening workers’ bargaining power.
These perquisites of a middle-class life are attainable. They were affordable a half-century ago, when the country was substantially poorer than it is today; and they are affordable now. In fact, neither America’s economy nor its democracy can afford not to bolster the middle class. Government policies and programs – including public options for health insurance, supplementary retirement benefits, or mortgages – are crucial to realizing this vision.
.. In a normal democracy, these ideas would, I am confident, prevail. But US politics has been corrupted by money, gerrymandering and massive attempts at disenfranchisement. The 2017 tax bill was nothing short of a bribe to corporations and the wealthy to pour their financial resources into the 2018 election. Statistics show that money matters enormously in American politics.
The World Is Our Field of Practice: Angel Kyodo Williams
for us to transform as a society, we have to allow ourselves to be transformed as individuals. And for us to be transformed as individuals, we have to allow for the incompleteness of any of our truths and a real forgiveness for the complexity of human beings and what we’re trapped inside of, so that we’re both able to respond to the oppression, the aggression that we’re confronted with, but we’re able to do that with a deep and abiding sense of “and there are people, human beings, that are at the other end of that baton, that stick, that policy, that are also trapped in something. They’re also trapped in a suffering.” And for sure, we can witness that there are ways in which they’re benefiting from it, but there’s also ways, if one trusts the human heart, that they must be suffering. And holding that at the core of who you are when responding to things, I think, is the way — the only way we really have forward; to not just replicate systems of oppression for the sake of our own cause.
.. And so even our sense of what pains us and what makes us feel shame, feel guilt, feel awkwardness, feel put-upon by people, feel disempowered, has to do with the external information and cues that we have received. And they’re moving at an incredible rate of speed. And, for the most part, we almost never get the opportunity to observe them and sort through them — kind of like that drawer that collects everything in your house.
MS. TIPPETT: I have a few of those.
REV. WILLIAMS: Yeah, where you say, “Oh, but wait a minute, someone lived in this house before me,” in essence. “And some of that stuff is not mine. Actually, this is not mine. That’s my mom’s. This is not mine; that’s the inheritance of white supremacy,” or, “That’s the inheritance of generations of oppression and marginalization that subjects me to habitually feeling less-than, even if the current situation has no intent to make me feel that way.” And we have no real way of being able to discern what is mine, what is yours, what are we holding collectively, what have I inherited, what have I taken on as a measure of protection, of a way to cope at some point in my life or past lives, that I no longer need?
.. because what we first are confronted with is just the assault of the amount of thoughts and the mixed messages that just inhabit our body and our mind and our experience on an ongoing basis — that when we sit, the first thing we’re met with is not quiet or calm or peace. The first thing we’re met with is, “Oh, my God. Who is in here, and why won’t they shut up? How do I get them to stop?” And not only is something and someone and everyone speaking to me, it’s mixed messages. Things don’t agree with each other. I don’t agree with my own truth. I’m having arguments in here that are not my arguments, they are someone else’s arguments. They’re my parents’ arguments.
Sitting lets us just, first of all, recognize that we are this massive collection of thoughts and experiences and sensations that are moving at the speed of light and that we never get a chance to just be still and pause and look at them, just for what they are, and then slowly to sort out our own voice from the rest of the thoughts, emotions, the interpretations, the habits, the momentums that are just trying to overwhelm us at any given moment.
And when I say “trying to overwhelm us,” that’s really a key thing to understand, because that means that there’s an “us.” There’s a core and deep and abiding “us” that is being overwhelmed by something that’s actually not us. And when we become aware of it, we’re like: “Oh, I actually have some choice here.”
.. I had to bring into the language of my perception of the world; and that love was not to be limited to my bedroom or my family and just people that I thought that I liked; that what I was doing in the past and what we often do and what our culture calls us to do is to use love to be a quantifier of “Do I have a preference for you?” [laughs]
MS. TIPPETT: That’s really well put.
REV. WILLIAMS: “Am I aligned and in agreement and affinity? Are you reflecting back at me what I want to be reflected back at me? And if you are, and if you are enhancing my idea of myself, [laughs] then I love you.” And bell opened up the idea that that was a very limited way of understanding — and she still does — that that’s a limited way of understanding love.
The way that I think of love most often, these days, is that love is space.
MS. TIPPETT: Say some more about that. What do you mean?
REV. WILLIAMS: It is developing our own capacity for spaciousness within ourselves to allow others to be as they are — that that is love. And that doesn’t mean that we don’t have hopes or wishes that things are changed or shifted, but that to come from a place of love is to be in acceptance of what is, even in the face of moving it towards something that is more whole, more just, more spacious for all of us. It’s bigness. It’s allowance. It’s flexibility. It’s saying the thing that we talked about earlier, of “Oh, those police officers are trapped inside of a system, as well. They are subject to an enormous amount of suffering, as well.”
I think that those things are missed when we shortcut talking about King, or we shortcut talking about Gandhi, or we shortcut talking about what Aung San Suu Kyi was doing at some point. We leave out the aspects of their underlying motivation for moving things, and we make it about policies and advocacy, when really it is about expanding our capacity for love, as a species.
MS. TIPPETT: That’s so interesting, to just focus on that word, “movement” — because again, if we just take a reality base, you don’t move people by hating them or criticizing them. And you don’t always move people by loving them, but you don’t have a chance of doing it with the other tools. But I’m also thinking so hard at the moment — you’re right, we haven’t even seen this aspect of that history, even the history that’s not so long ago. I sometimes have this feeling that we are only now growing into, for many reasons, the aspect of consciousness here, what you’re talking about — the real human work, without which those political changes are fragile.
.. REV. WILLIAMS: We’re at this unique time. I’m surprised, actually, that more people aren’t talking about it. I think I may have glimpsed an article that I disciplined myself to not read. But we are at a time, so incredibly unique in human history, where there is a meaningful number of us that are not driven by mere survival, and we are not defined by the work that we do or the place from which we come. We are able to be transient. We can move around places. We can create meaning out of things and ways of being and work that we choose to do. And we can recreate it, over and over again. We’re not defined by where we are or what we do. We can make meaning out of it, but we are not defined by it in a way that former cultures and societies that were limited in transportation and had a necessity to be able to put food on the table, and so we farmed, and so we did a whole bunch of things that were about fundamental necessities.
.. MS. TIPPETT: You just inherited identities from — all kinds of identities from your kin.
REV. WILLIAMS: And they’re inherited. That’s exactly right, which is part of our great conflict in this country right now. We are running into the conflict between people that inhabit an inherited identity with the place that they are — coal-mining country, and the work that they do as a result of the place that they are — up against people that have values and ways of perceiving the world that have shifted because they are not identified by their place and the work that they do in the same way that location and a fixed place tells you who you are and how you be in the world.
And that conflict, and the values that come from those two disparate locations, is the conflict that we are up against right now — in this country, in particular, but also in other places in the world.
MS. TIPPETT: All over, yeah. It’s global.
REV. WILLIAMS: We are in this amazing moment of evolving, where the values of some of us are evolving at rates that are faster than can be taken in and integrated for peoples that are oriented by place and the work that they’ve inherited as a result of where they are.
MS. TIPPETT: Yeah, and who are in survival mode.
REV. WILLIAMS: And who are in survival mode as a result of that, and so our values and what’s acceptable to us — enough of us — is shifting at a pace that is just outside of some of our ability to even take in. And the problem is — that’s always been true, but the problem is, now we have a meaningful number, a substantive number of people that have those rapidly evolving values in confrontation with people that are, understandably, still working with the location-, survival-based orientation. This means a lot of things for us. This means that, in terms of values, we can be more spacious. There are many of us that can afford, literally, to be OK with people that are really, really different. In fact, we can be curious about it, because our sense of threat is diminished, because our identity is not prescribed by sameness and being afforded belonging because of sameness.
Our own identities have evolved in such a way that, because we’re not merely trying to survive — I’m not saying we’re not trying to pay our rent and everything, but because we’re not identified with merely trying to survive, our sense of survival, our sense of thriving is embedded in a sense of movement and spaciousness and increasing allowance for more and more difference that is in direct conflict with people that are in a space-time continuum that is still place-based, survival-based, get-food-on-the-table-based. “If I don’t cut off the top of this mountain, where will I go? If those people are not beneath me, how will I know my own value?” Et cetera, et cetera.
.. It is part of it, to go through the fits and the denial. There’s a death happening. There is something dying in our society, in our culture, and there’s something dying in us individually. And what is dying, I think, is the willingness to be in denial. And that is extraordinary. The willingness to be in denial is dying in a meaningful number of us, the tipping point. It’s always been happening, and when it happens in enough of us, in a short enough period of time at the same time, then you have a tipping point, and the culture begins to shift. And then what I feel like people are at now is, “No, no, bring it on. I have to face it; we have to face it.” We have to face it; I also think, what people know is that, short of a nuclear war, we’ll survive it.
Trump the European Nationalist Puts America Last
President Trump, in concert with several European leaders, including those of Hungary, Poland, Austria and Italy, is intent on dehumanizing immigrants and refugees. The aim is to equate them with terrorists and criminals ready to “infest” — Trump’s word — American and European civilization, defined as a threatened white Judeo-Christian preserve.
It’s a consistent policy buttressed by insinuation and lies about the supposed threat, and designed to manipulate fear and nationalism as election-winning emotions in a time of rapid technological change, large migrant flows and uncertainty. Vermin infest, not humans.
Every utterance of Trump on immigration is meant to conflate immigration with danger. This is a direct repudiation of America’s distinguishing essence — its constant reinvention through immigrant churn.
The immigrant brings violence. The immigrant brings terror. The immigrant’s humanity is lesser or nonexistent. These are tropes about “the other” whose capacity to galvanize mobs, and wreak havoc, was proved in the first half of the 20th century. Trump does not hesitate to use them.
.. Viktor Orban, the right-wing Hungarian leader, who has said that “every single migrant poses a public security and terror risk.”
.. The Hungarian parliament has just passed legislation that would throw people in jail for providing assistance to asylum seekers and migrants.
.. Matteo Salvini, the rightist Italian interior minister
.. Before taking office, he said Italy was packed with “drug dealers, rapists, burglars,” whom he wants to send home.
.. the destabilizing impact of globalization on Western democracies; stagnant middle-income wages; growing inequality; fear of an automated future
.. the ease of mob mobilization through fear-mongering and scapegoating on social media.
.. Trump is strong because of a global nationalist lurch; that his feral instincts make him dangerous; and that he may well win a second term, just as Orban has now won four terms.
To ridicule Trump will achieve little absent a compelling social and economic alternative that addresses anxiety. The Democratic Party, for now, is nowhere near that.
.. Trump likes to go for the jugular. He sees opportunity in a Europe that is split down the middle between nations like Hungary and Poland that make no attempt to sugarcoat their anti-immigrant nativism and states like Germany that have not forgotten that the pursuit of racially and religiously homogeneous societies lay at the core of the most heinous crimes of the last century.
.. Orban is the most formidable politician in Europe today. It’s no coincidence that Trump called him last weekend. Their aims overlap.
.. Trump tweeted this week that “Crime in Germany is way up” and that allowing immigrants in “all over Europe” has “strongly and violently changed their culture.”
.. Trump (whose stats on German crime were wrong) backs Orban against Chancellor Angela Merkel of Germany in the continuing bid to make racism and xenophobia the new normal of Western societies.
.. the greatest danger is within. A two-term Trump presidency would likely corrode American institutions and values to the point at which they could scarcely be resurrected.