“The old world is dying, and the new world struggles to be born: now is the time of monsters.” This famous quote, often attributed to Antonio Gramsci, feels particularly pertinent today, as the international order that has defined the past century undergoes a profound shift.
That order has been shaped by two pivotal historical moments. The first came after 1945, when the current international system was established through the creation of the UN and the Bretton Woods institutions. The second occurred in 1989, with the fall of the Berlin Wall marking the West’s victory in the Cold War.
Since then, we have lived in a unipolar world characterized by a high degree of global integration. The rules and norms that shaped international economic relations were upheld by US security guarantees and rooted in the belief that economic interdependence would overcome geopolitical rivalries and foster prosperity.
Illustration: Yusha
The world today is very different. It is a multipolar world, with China, Russia, India, Turkey, Brazil, South Africa and the Gulf states challenging the old order, alongside other emerging powers demanding a greater voice in shaping the rules of the international system. Meanwhile, belief in “universal values” and the idea of an “international community” has waned, as many point to the hypocrisy of rich countries hoarding vaccines during the COVID-19 pandemic and the response to Russia’s war against Ukraine compared to the failures to act in response to humanitarian crises in Gaza, Sudan and many other places.
Adding to these pressures, US President Donald Trump has threatened to withdraw the security guarantees that have been crucial for Europe and Japan, quit many international organizations, and impose trade tariffs on friends and foes alike. When the guarantor of the system walks away from it, what comes next?
We might be heading to a zero-order world in which rules are replaced by power — a very difficult environment for smaller countries. Or it may be a world of large regional blocs, with the US dominating its hemisphere, China prevailing over East Asia and Russia reasserting control over the countries of the former Soviet Union. Ideally, we can find our way to a new rules-based order that more accurately reflects our multipolar world.
To get there, we need to better understand why the old order failed. For developing countries, the international system failed to adapt to give them an adequate voice, whether that be reform of the UN Security Council or voting shares at the Bretton Woods institutions.
In the advanced economies, an overlooked factor is the failure of social contracts at the national level to adapt to developments in the world economy. Social contracts — the rules, norms, rights and obligations that underpin national cohesion and political stability — affect everything from how families are organized to how challenges like unemployment, illness and aging are addressed. The failure of these arrangements to provide prosperity, security and shared identity was particularly acute in the advanced economies that once served as the architects and guardians of the old order.
Domestic social issues affect the international order in two important ways. First, in an interconnected world, domestic and foreign affairs are often one and the same. Labor markets are shaped by global economic developments, social and cultural trends spill across borders through mass media, and one country’s policies affect outcomes in others.
Second, people’s attitudes toward the social contract at home affect their perceptions of international issues. When individuals feel prosperous and economically secure, they are more likely to support open economies and societies and to be generous toward the less fortunate, both domestically and globally.
Paradoxically, the countries that built the global order and benefited the most from it are now experiencing the greatest strain on their social contracts and the strongest domestic backlash against globalization and international cooperation. This dynamic is often difficult for economists to grasp, as the profession is rooted in positive-sum ideas: countries benefit from trade, competition is good for consumers and efficiency-enhancing policies make societies better off.
Economists are less adept at zero-sum thinking — the belief that when someone gains, others must lose. That has been the Achilles’ heel of recent policymaking, which has paid insufficient attention to distributional issues and failed to consider how to sustain political support for positive-sum economic policies.
The most telling example of our current challenges can be found in surveys asking parents whether they think their children will be better or worse off than them. In almost every advanced economy — especially in Europe, the US and Japan — parents overwhelmingly believe their children would be worse off. By contrast, in virtually every developing country, the opposite is true.
These expectations are well-founded in data. In most advanced economies, the real incomes of millennials and Gen Xers are barely higher, if at all, than those of their parents at the same age. They also tend to be significantly more indebted and less likely to own a home.
People who grow up during periods of slow economic growth and limited social mobility are more likely to develop a zero-sum mindset. As advanced economies have stagnated and social mobility has declined, support for zero-sum politics has risen across both the left and right, fueling the rise of leaders who pledge to protect their constituents from perceived external threats.
A recent study by economists at Harvard and the London School of Economics and Political Science examines the origins and implications of zero-sum thinking across four generations of Americans. It finds that a “more zero-sum mindset is strongly associated with more support for government redistribution, race and gender-based affirmative action, and more restrictive immigration policies.”
Such thinking can be traced to the experiences of individuals and their ancestors, including how much intergenerational upward mobility they achieved, whether they immigrated to the US or lived in communities with larger immigrant populations, and whether they were enslaved or lived in regions with higher rates of enslavement.
We cannot build a new, stable and cooperative global order that benefits everyone without first repairing domestic social contracts. When people lack security and opportunity at home, they turn inward, fearing competition and immigration. Divided and anxious societies become fertile ground for populism, nationalism and the politics of selfishness. Conversely, when the economic pie is growing, it is much easier to be generous to the disadvantaged within our own societies and in the rest of the world. Attitudes toward foreign aid and international policy coordination often reflect this dynamic, varying across countries and over time.
A better social contract would enable a widening of what Adam Smith called “circles of empathy” and foster more positive-sum thinking, but what would such an order look like? I want to focus on three key themes: prosperity, security and identity.
To sustain a positive-sum view of the world, we must believe in the possibility of progress. This fundamental truth is evident in the surveys showing parents’ pessimism about their children’s future prospects. It also explains why the “no growth” agenda of some environmentalists is so politically problematic.
Progress can take the form of economic growth and material improvements in people’s lives. It can also mean advances in well-being, such as more meaningful human relationships, more robust physical and mental health, a healthier environment and greater overall life satisfaction. For the social contract to work, it is essential that everyone has the opportunity to improve their lot. Notably, disaffection is often most pronounced in countries and regions where the likelihood of upward mobility is slim or diminishing.
In too many countries today, talent is wasted because opportunities are not accessible to everyone. Much of this wasted potential belongs to women and children born into families or communities that lack the resources to provide them with opportunities. How can we better harness the talent within our societies? In addition to investing in the early years of life, we should ensure that all young people have equal access to education. This could include a lifetime endowment to fund university studies or vocational training, preparing individuals for what would likely be much longer careers.
Although most countries have equalized access to education for girls and boys, women remain disadvantaged in the workplace. This is largely because they perform two hours more unpaid labor per day than men, including housework and caregiving. More generous parental leave, increased public funding to support families and a fairer division of labor at home would enable societies to make better use of female talent.
Moreover, in every society, it is possible to establish a minimum income level below which no one should fall. This can be achieved through cash-transfer programs in developing countries or tax credits for low-wage workers in advanced economies. That said, I remain skeptical about universal basic income in any country capable of targeted benefits, as it is inefficient to give money to those who do not need it.
Minimum benefits should include access to basic health care and a state pension sufficient to prevent destitution in old age. They should also cover sick leave and unemployment insurance, regardless of employment contracts. In developing countries, this requires bringing more workers into the formal sector. In advanced economies, it means mandating that employers provide benefits to flexible workers in proportion to how much they work.
Likewise, too many risks in our societies are borne by individuals when they could be more efficiently shared or managed collectively. For example, employers could maintain flexibility in hiring and firing workers based on market conditions if workers knew they would receive unemployment insurance and retraining programs to provide them with security until they find new jobs.
A similar rebalancing of risks is needed in areas like childcare, health care and eldercare. For example, it is unclear why employers typically bear the cost of maternity leave when tax-funded parental leave would create a more level playing field for men and women in the labor market and reduce the burden on firms, especially smaller ones.
Likewise, many health risks can be managed more efficiently by pooling them across larger populations and incentivizing individuals to mitigate future health problems through diet and exercise. Automatic enrollment in pension schemes and eldercare insurance would provide individuals with greater security later in life. Japan and Germany, which require people to have social care insurance, offer a useful model for pooling such aging-related risks.
Just as economists do not pay enough attention to zero-sum thinking and distributional issues, they also tend to underestimate the importance of identity. I once believed that more inclusive economic and social policies could knit society back together, a belief that motivated me to write my book What We Owe Each Other: A New Social Contract for a Better Society. However, recent events have led me to change my mind about the role of identity in forging a viable social contract.
Identity, after all, is the glue that holds the social contract together. The late academic of nationalism, Ernest Gellner, emphasized the importance of a shared educational system, cultural homogenization, a common language and national identification in forging national identity. Countries as different as Switzerland and India show that it is possible to foster a national identity even in federal systems with multiple languages. Developing a positive agenda around a shared identity rooted in common values is especially important in diverse societies.
To be sure, identity is not a monolith, nor is it solely about ethnicity or religion. Each of us has multiple identities shaped by factors such as education, profession, sexual orientation and personal interests. However, the sense of a shared destiny is what holds society together and motivates us to take on the responsibilities of citizenship, whether that means paying taxes, following the law or participating in civic life.
For example, consider immigration — arguably the most salient issue raised by populist politicians in Europe and the US. While most economists would argue that immigration is generally good for growth, the immigration debate is rarely about economics. Instead, it centers on identity: who we are as a society and when those arriving from elsewhere should be permitted to participate in our social contract. That is why anti-immigration rhetoric often focuses on immigrants’ or refugees’ access to public services such as housing, education and health care, which are seen as benefits earned through contributions made over several generations.
We are in the midst of a fundamental reordering of the global system, the outcome of which remains unclear. I am convinced that achieving a positive-sum international order would require stronger country-level social contracts that deliver progress, security and a sense of shared identity. We cannot allow those who define identity in zero-sum, exclusionary and selfish terms to dominate the global narrative.
By working on these national issues, we could increase the likelihood of creating a fairer international system that delivers better outcomes for all.
Minouche Shafik, a former president of Columbia University and the London School of Economics and Political Science, is a member of the UK’s House of Lords and the author of What We Owe Each Other: A New Social Contract for a Better Society.
Copyright: Project Syndicate
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