Capitalism at crossroads as nations look inward
MIKIO SUGENO, Nikkei senior staff writer
TOKYO -- A global economy that has been based on prosperity through free competition and trade is facing major challenges.
People around the world are voting for change in the face of anger over widespread inequality and fear of immigration. Countries are now looking inwardly, and economic compasses need to be adjusted at a time when capitalism and democracy are falling out of step.
Beppe Grillo, leader of the Italian Five Star Movement political party that stands against the European Union, said, "Political amateurs are conquering the world" as he praised the victory of Donald Trump in the U.S. presidential election.
On Dec. 4, Italians will vote on Prime Minister Matteo Renzi's proposal for a constitutional amendment to reduce the power of the Senate in order to facilitate decision-making procedures. With Renzi putting his political fate on the referendum, opponents of the proposal, who challenge politics by professional politicians, are getting a boost from Trump's win.
Shifting views on capitalism
French critic Tzvetan Todorov pointed out in his book "The Inner Enemies of Democracy" that populists understand the mechanism of how people's voting rights sway parliaments and see it as their home. Discourse that fans popular fears attracts voters and poses a threat to existing power structures. Democracy is pressuring capitalism to change.
In June, the International Monetary Fund released a paper titled "Neoliberalism: Oversold?" in a magazine it publishes. The essay questions whether the policy of promoting growth through the liberalization of capital and fiscal health has expanded inequality and eliminated opportunities for growth. This self-examination by the IMF, a key advocate of neoliberalism that calls for laissez faire approaches to economic development, symbolizes changes in tidal currents in the world.
Flaws in free economic competition promoted since the late U.S. President Ronald Reagan have come to the fore along with low growth following the global financial crisis that occurred eight years ago.
In the U.S., the top 10% of income earners account for 50% of total income, which is an increase of 10 percentage points from 20 years before. Wealth is also becoming concentrated within the top 10% of the populations of Germany and Japan, with their income shares at close to 40%.
In an analysis on Brexit, European think tank Bruegel wrote that many Britons in districts where poverty and income disparity are noticeable voted to leave the EU. To prevent protest votes from spreading, economic growth that offers opportunity to the entire country's population is important, it said.
Multilateral countermeasures are necessary. For people who lose jobs as a result of advances in information technology, more seminars and training programs should be created to help them find new employment. Mechanisms to avoid educational structures for children based on their parents' income are needed as are reviews of the wage and tax systems in order to correct inequalities.
Age of uncertainty
The countermeasures should be seen from the perspective of achieving a balance between economic growth and the distribution of its benefits to facilitate a virtuous cycle. It is important to establish systems that ensure sustainable funding sources and are free of factors that inhibit innovation and the will to work.
Denying the negative side effects of globalization leads to less equilibrium in the global economy and boosts discontent among people who will cast protest votes.
Leaders who gathered for the recent Asia-Pacific Economic Cooperation summit in Peru reaffirmed that they would "fight against all forms of protectionism." But pundits wonder if they really mean it.
Referring to the blame-game nature of the U.S. presidential election, for eight consecutive days China's state-run Xinhua News Agency ran commentaries pointing out the ironies of democracy and inefficiencies in the U.S. and Europe. But it has completely stopped doing so since Trump won the election.
The world has entered an age of uncertainty where scenarios once considered impossible are happening one after another. Clashes over new dynamics are occurring across the globe.