January 13, 2015 2:20 am JST
Francis Fukuyama interview

The end of history? America's fall from grace

HIROYUKI NISHIMURA, Nikkei senior staff writer

NEW YORK -- For good or ill, perceptions of the U.S. color views on democracy and capitalism. America has been more apt to disappoint than inspire in recent years, critics say. The global financial crisis, widening economic disparities, gridlocked politics and aimless foreign policy have shaken confidence in the superpower.

     When the Cold War ended, American political scientist Francis Fukuyama was among those declaring victory for the West. The Nikkei recently asked him about the contradictions in today's world and what can be done to correct them.

     An edited transcript of the interview follows.

Q: A quarter century after the end of the Cold War, the world is in disorder, the most recent stemming from Russia's aggression in Ukraine. What do you think are the important developments that took place during the post-Cold War period?

A: Obviously, especially in this year 2014, there are some very troubling shifts that are going on in world politics. I think the two most important are Russia and China, both of which are authoritarian; they're large countries, they're making territorial claims against their neighbors, and they've got a lot of momentum behind them. And probably the single biggest disappointment is what happened in Russia because, in 1989, when Gorbachev was in power, it looked as if Russia was really going to change in a fundamental direction and join Europe. But, under Putin, all of that has been reversed and it is actually, now, descending into a very nasty kind of nationalism. He keeps labeling other people as "fascist," but his regime is actually much closer to fascism.

Q: People are now even talking about the new Cold War. Do you have any new thoughts about your 1989 essay "The End of History?" in which you wrote about the victory of democracy and capitalism?

A: The Cold War was both a geopolitical and ideological conflict. What's happening now isn't ideological anymore. The end of history, really, it's not about stopping something. The question is: What's the direction of evolution of human societies, its end in the sense of objective. And the question is, I think, are we going to end up as democracies, or are we going to end up with something else? And I think, I think, to the extent that there is an end of history, it continues to be democracy. The Russian model is not really a model that anyone can emulate; it's just based on energy and very low-quality institutions.

Q: What about China? Aren't they presenting a new model?

A: They have a pretty competent state and the country is very focused on development and, in certain ways, they can do things more efficiently than a democracy. So, it really leaves only China as a kind of vigorous modernizing force. But for various reasons, I don't think that one is going to sustain itself over the next couple of generations. I don't see that everybody is going to evolve towards a China model. I just don't think that that's going to be the end of history.

     I think that, first of all, it's very hard to replicate the model. I think it's very culturally specific to China. So if you said, "Well, what's the China model and what does that represent?" -- well, part of it is Marxism-Leninism, part of it is Confucianism, both of which are mutually, really, incompatible. Part of it is just naked self-interest. So, there's not a kind of coherent set of ideas underpinning the Chinese system, the way there is in the American system. So, in that respect, I think they're going to have trouble winning the battle of ideas.

     And the Chinese aren't trying to propagate their model to other countries. It just works for them. In that sense, I think the Soviet Union did represent a universal model that they tried to export to other countries. So that's what's different from what the Soviets were trying to do.

Q: You don't see the same kind of Cold War that existed between the U.S. and the Soviet Union emerging between the U.S. and China?

A: Well, there's going to be a big rivalry; that's already occurring, I think. The relationship is becoming strategic, with all the territorial claims China is making. But they're not making these demands in the South China Sea and East China Sea because they are communist. They're making them because they're big, and they're continuing to get bigger. So, I just don't think that it's the ideas that are what's driving this; it's really just old-fashioned geopolitics.

     I just think it's a matter of national interest, that China feels that it's getting more powerful, that it used to be the center of the system in East Asia, and it's not getting the respect that it once had a few hundred years ago. But now that it's powerful, it ought to. So, I think that's really what's the issue; it's not ideology.

Q: The increased radicalism of Muslims is another source of concern in today's world. What is your view now about the late Harvard professor Samuel Huntington's arguments about the "clash of civilizations," which was often contrasted with your "end of history"?

A: Well, I never found them very persuasive, because nobody thinks of themselves as being part of a "civilization." They think of themselves as being members of countries, and so countries are still the major way that human beings organize themselves. And identity is built around national identity and the identity of a single country. In Asia, nobody thinks that "I'm an Asian," or "a Confucian." They think, "I'm Chinese," or Korean, or Japanese. And the differences between those countries are much more important than any shared culture.

     The only real exception to that is in the Islamic world, where people do sort of think of a larger Muslim community. But I don't think, really, that Islamic fundamentalism is going to take over the world.

Q: We are now witnessing young people in the Western world join terrorist organizations like ISIS. Do you think Muslim radicalism is being seen as an antithesis to the Western world?

A: No, I think that it's actually the result of the failure of an Arab model. Arab government has been a failure everywhere. It's been dictatorial. It has not produced strong economic growth, unlike China. It's not raised living standards significantly, or dealt with poverty, or anything else. As for the people joining organizations like ISIS, at most, there's like a couple thousand of them. It's really not a significant number. And I think, even in the Middle East, you still get very large majorities that are not supportive -- they don't really find this particularly attractive.

Q: On the other hand, it's undeniable that the United States has lost its luster and so did democracy and capitalism. What do you think caused this?

A: I would say that the most important events of the recent past are the Iraq War and the financial crisis. I think the Iraq War showed the limits of American military power to shape events in the Middle East, which continues to be a very unstable and important part of the world.

     And I think it had a very negative effect on American prestige, on American power, because it discredited the idea of democracy promotion, in the eyes of many people. It also wasted a huge amount of money and I think the United States doesn't want to intervene anywhere now, because they're exhausted from two big wars in the Middle East, one of which I think was completely unnecessary. I think that if we had only intervened in Afghanistan, and if we had pulled out or reduced our presence at the right time -- if we had done more at the beginning and less later, I think we would have a very sustainable kind of policy. But we spent so much money on the Iraq War and all these lives, and I think people just don't want to do that again.

Q: The rise of neoconservatives, who supported the wars in the Middle East, is said to be based on your assertion that the United States take an active role to bring about a democratic world. Do you think that is true?

A: Well, first of all, I never made a big deal about the importance of American military power to bringing about a democratic world. And I think their big failure was the thought that use of just hard power could politically transform the Middle East. I never believed that, so I think that was a distortion of anything that I believed.

     Democracy has been spread, I think primarily, through the force of example. With American institutions working well, people want to emulate that. And then there's other stuff. I'm on the board of the National Endowment for Democracy, which gives a lot of grants to labor unions and women's rights groups and other civil society organizations that want to give voice to people that don't have power in other societies. I think that's been the primary method and it's been discredited, because of the Iraq War.

Q: You also mentioned the financial crisis. How did that affect the prestige of America and its model?

A: It really began with a crisis in Europe in the early 1990s and the Asian financial crisis in 1997, and then both the American and European financial crises in 2007 to 2010.

     The financial crisis, I think, was actually just part of a series of financial crises that I think properly should mark the end of this free market move that began with Thatcher and Reagan. I think what we should have learned is that liberalized financial markets are very unstable and they're very dangerous, and that all of the efforts to unleash the financial sector were a big mistake.

     I think modern economics played a certain role in it, because if you take a standard microeconomics course, it'll teach you that in a well-functioning market economy everybody is going to be earning their actual social utility, and so if a hedge fund manager earns $5 billion and a waiter earns $20,000, it's because the hedge fund manager has contributed so much more to society. There is something fundamentally wrong with that. I just think that that theory has been proven wrong, but people continue to believe that. The financial sector, as a whole, arguably, actually created negative value in the 2000s. But before the crisis, they represented 40% of all corporate profits. There's something very distortive about the financial sector, because finance is supposed to be a helper to the real economy. It provides capital as an input to production. But somehow finance has come to be the dominant force within the capitalist system. There's something wrong with an economy that is so finance-based, because these people are just not creating that much wealth.

Q: You just published a new book, "Political Order and Political Decay," in which you warn about the political dysfunction in the United States and other places. Is this book your response to why democracy looks less promising than immediately after the Cold War? Could you talk about how the theme relates with the financial crisis?

A: As for the financial sector, there are some things that didn't take place, like adequate regulation. But that's also a response to what I consider political decay. If you want to ask why you don't have adequate regulation, it's because the political system has been captured by very powerful, well-organized interest groups.

     And I think the pendulum has begun to swing back towards greater state control over international capital movements. But, I think the correction hasn't been strong enough yet. It needs to go further. It's been blocked because the banking lobby, for example, in both Europe and the United States, is politically too powerful, and they won't let this happen. So, in a sense, there has also been a political failure in terms of democracy and in terms of democratic societies being able to really control things that go on within their borders.

Q: You've warned the rise of society where patrimonial dynasties and interest groups became too politically influential. Is Wall Street among the most powerful?

A: Wall Street is the richest one, but there's actually quite a lot. Oil, and agriculture, and a lot of special interests have been able to use the political system to protect themselves at the expense of a broader public good. We have a tax code that is full of special exemptions and privileges, and when we try to do a major policy reform like Dodd-Frank or the Affordable Care Act, it turns into terrible legislation because you've got to satisfy hundreds and hundreds of interest groups, and I think it's a sign that the democracy really is not working well.

Q: What do you think is at the root of all this?

A: It's a couple of things. Over time, if you go through a prolonged period of peace and prosperity, there is a natural tendency of well-established groups to get bigger and stronger. Elites have a way of using the system to their own advantage.

     There is also this other external factor, which just has to do with growing inequality, that as a result of technological change, primarily globalization, you're getting a high concentration of wealth, not just in the United States but in many other countries. And wealthy people can use the political system to their own advantage. So, we have an extremely low degree of trust in our own major institutions, and that's a real problem because it becomes a self-fulfilling prophecy. If you don't trust the government and you don't want to pay taxes, and you don't want to give the government any authority to do anything, then it doesn't do well, and so you end up in a vicious cycle.

Q: What is your take on French economist Thomas Piketty, dubbed by some "the modern Marx" by his controversial study on rising inequality?

A: Actually, the real causes of inequality are not a long-term characteristic of capital, per se, but of the particular technological age that we're living in. Whether his argument is right, I think we're not going to know until you've had several years of graduate students picking over his data and making much more detailed analysis. However, he represents a concern, a global concern, about inequality, which I think a lot of people, politically, weren't ready to recognize, as little as five or six years ago.

     You know, when President Obama talked about redistribution, back in 2008, the Republican Party in this country were universally hostile and criticized him for being a socialist and so forth. And most of them would simply, flatly, deny that there is any increase in inequality, and even if there was they would have said it's not a problem. I think it's harder to maintain that position right now.

Q: You are politically conservative, and I think it's rare for somebody like you talk a lot about inequality. Don't you think that is causing a lack of real debate?

A: I think that's just ideology, that some people just have a fixed view of the world.

Q: Do you see any solution to this issue?

A: No, I have no solution whatsoever. Because I think it's fundamentally being driven by technology, by the ability of "smart machines" to replace more and more forms of human labor.

     The classic solution was just redistribution, which I think you need to do. You need to have a safety net and you need to protect people, to some extent, but it's not going to help, fundamentally, in the long run. It's going to destroy incentives to work and it will, in the end, probably not be sufficient to really fill in some of those gaps.

     The other solution that economists always point to is just better education, but, again, I'm just not sure that that's actually going to solve the problem. First of all, it's not that easy to reform educational systems. And secondly, even if you did a much better job of educating, it's not clear that everybody is actually trainable to do useful things.

     I'm interested in the political system and how it deals with these economic and social realities and whether it can make decisions and actually provide services on an impartial basis. That's what I am concerned about. I think that it really should be able to deliver certain basic public goods and public services in ways that are responsive to the whole population and not just to the narrow interests of the people running the government. For example, you don't give better-quality police services to rich people than to poor people.

     But it does not necessarily mean that the government equalizes the incomes between rich people and poor people. But the services that it does provide it needs to provide impartially. And it may be that there's no system of government that ultimately is going to be able to deal with some of these problems.

Q: You see strength in the Scandinavian political system. Could you explain why?

A: What I like is not the level of redistribution -- this is one of the most important points in my new book. I don't think that the actual level of redistribution is nearly as important as the quality of government, and what is really good about Scandinavia is that they have very low levels of corruption. It's not that they redistribute a lot and have a big welfare state; it's that they manage to run even that big state very efficiently, and I think that's really what they've got going for them.

     A good political system has three components. So, it has to have a state that can generate power and use it. It should have a rule of law that constrains the state and makes it operate according to certain rules, and it should have democratic accountability. It's a kind of balance. And, if you have too much power and not enough constraint, that's one problem. If you have too much constraint and no power, that's another kind of problem.

     For example, being able to come up with a budget every year that is sustainable over a 10- or 15-year period of time is a pretty good indicator of the quality of a government, and there are a number of democracies that have been able to do that, and the United States has not been able to.

Q: It's puzzling why the frustration has not lead to any serious explosion in the United States.

A: If a political system gets too much out of sync with the social reality, there's going to be an explosion at a certain point. Right now, I don't see that happening in the United States because I think all the anger and the unhappiness has been diffused in a lot of different directions. For example, on the left, in this country, if you look at the Democratic Party, it's a big coalition and identity politics is, overall, more important than economic issues. So probably more people are going to vote for Hillary Clinton because she's a woman than because she represents a solution to this problem of inequality.

     What are people worrying about now? Ferguson, and racial politics and this sort of thing. I think that has been one of the problems on the left. There's a really big faction that thinks that global warming is the most important issue and that that's more important than inequality. These are all serious issues. But, there are just a lot of them, and it pulls the progressive left into a lot of different directions.

Q: And what's happening on the right?

A: Well, the right is a little bit more focused, because they really are focused on the state and cutting back government. But, even in that case, it's complicated because, in this country, we have these cultural issues like gun ownership and abortion, which actually attract a lot of working-class voters who vote Republican, even though the Republicans are hurting their economic interests. But they're more interested in being able to keep their guns than in international competition or outsourcing or things like that.

Q: So, does this mean the U.S. will not be able to get its agenda focused? It is a nation with very diverse ideas after all.

A: That's the role of leadership. A really great leader will explain to people what a good agenda is and why their interests are really different from what they say. I just don't think there have been particularly good leaders in recent years.

Q: In the United States, wealth and power concentrated significantly towards the late 1920s, but the nation managed to overcome it. Will history repeat itself?

A: Maybe. But if you want to answer the question, why did the problem get solved? First of all, we had a horrendous depression with 25% unemployment that lasted for the next 15 years. And it caused so much pain and anguish that people were ready for a really big change in the political system. You had some good leadership, in the form of Roosevelt. And you had a popular mobilization, which led to the New Deal and the establishment of the American welfare state. So yes, the problem was ultimately fixed, but it was fixed at a very high cost, and it also was fixed for reasons that had to do with things that are not necessarily easily reproducible, like great leadership.

     I do think that there are some institutional changes that you can make that would make this country more governable, but whether that's going to fundamentally solve the problem, I sort of doubt. If you got rid of the stupid series of Supreme Court decisions that permit money in politics, I think you would reduce the impact of lobbyists and campaign contributions and this sort of thing. But our system is so hard to change that that's not going to happen anytime soon.

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