LIN YONGLIANG

Associate Research Fellow, Center for Contemporary World Studies, International Department, CPC Central Committee

ONGOING PREDICAMENTS OF CAPITALISM AND FUTURE TREND OF WORLD ORDER

LIN YONGLIANG

Associate Research Fellow, Center for Contemporary World Studies, International Department, CPC Central Committee

According to the viewpoint of historical materialism, the economic base determines the superstructure. In the long process of its development, capitalism has not only shaped political and economic institutions within countries but also profoundly impacted the development and transition of the world order. However, since the international financial crisis of 2008, the capitalist system has encountered a major crisis, and the world order is faces with a series of dilemmas. It is necessary to gain an in-depth understanding of the inherent mechanisms for capitalism to shape the world order, to make systemic analysis of the essence of ongoing predicaments of capitalism and based on this to reflect on concepts and measures that guide the development trend of the world order.

DILEMMA OF NEOLIBERAL WORLD ORDER

In the past decade or so since the financial crisis, the neoliberal world order has been at issue. In the first half of 2017, President Trump declared US withdrawal from the Trans Pacific Partnership (TPP) and the UK Government started the “divorce negotiations” with the EU. As promoters and leaders of the capitalist world order, the choices made by the US and the UK give proof to the fact that the neoliberal world order has suffered major predicaments.

First, the growth rate of international trade has continued to be lower than that of global economy. According to the statistics of the World Trade Organization (WTO), 2016 is the fifth consecutive year for the growth rate of global trade to be lower than that of global economy. From the collapse of the Berlin Wall in 1989 to the eve of the outbreak of financial crisis in 2007, the proportion of the flow of international capital in global GDP increased rapidly from 5 percent to 21 percent, and that of international trade in global GDP increased from 39 percent to 59 percent. People living in countries other than their birth increased by 25 percent and more. However, since the financial crisis, except transnational flow of population has continued, the other two indicators have faded. In 2008, the flow of international capital snow slid to 4 percent of global output and further to 2.6 percent by 2015. International trade reduced from 60 percent of global GDP to 58 percent. The size and growth rate of capital flow and trade flow continuing to be lower than that of economic growth reflects from a side that globalization of economic factors has met a strong headwind.

Second, to go hand in hand with change in social economic data is change in people’s thinking and outlook. A case in point is the attitudes of general public of the US and Europe to the Trans Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP). According to an investigation by Yougov, a global online market survey organization, 55 percent of German people supported the TTIP in 2014, but the figure dropped to 17 percent in 2016. In the US, things are similar. As far back as 2015 when the TPP announced the conclusion of its negotiations, protests happened in the streets in Atlanta in opposition to the TPP that was perceived as hurting the interest of the general public. In the past decades, international free trade used to be a flag flaunted by capitalist countries such as the US and the UK, however the cold reception of the TPP and TTIP seems to indicate that this idea has increasingly become “politically incorrect”.

Third, the two aspects as described above have already imprinted in the political landscape of developed countries. In the US, Donald Trump won the presidential election by consoling the inde-scribable anger and discontent of low and middle strata of the white people. Elected, he began to pursue “America first” with strong colors of protectionism and xenophobia. In the UK, a referendum has turned “Brexit” from thinking into the fact of life. In Germany, the Merkel Government’s policy of accepting refugees has led to the rise as a new force of the right-wing Alternative for Germany (AfD) that stands for restoring border control and exiting the Euro zone. In France, though Marine Le Pen did not win the presidential election, the momentum built by the National Front led by her in recent years has posed a serious threat to the traditional mainstream parties. In Italy, the Five Star Movement holding anti-immigrant and anti-Europe positions has not only won local elections in Rome and Turin but also kept high ratings in the polls. Besides, the extreme right-wing force in the Netherland, though failing to win the general elections, has become the second largest party in parliament. The Podemos Party of Spain and the Freedom Party of Austria have become important forces in the political pattern of their respective countries.

Fourth, geopolitics and realism are on the rise in international relations. Since 2008, the style of diplomacy of the major powers has tended to be pragmatic, as if the world were returning to a political era of realism. China’s diplomacy has become more proactive, prioritizing to push the international order and global governance toward more equity and reasonability. Under the leadership of Putin, Russia has taken frequent practical measures on the issues of Ukraine and Syria, being on the offensive in dealing with the US and Europe on the grand chessboard. Seemingly not to flinch from challenging the bottom line of traditional Western values, Trump has all along gone by the principle of America first, exposing the fragility and hypocrisy of traditional Western values. After transferring himself to the office of Turkish President, Erdogan has completed his transformation of government institutions of Turkey, almost all set for a permanent government. Egypt led by El-Sisi struggles to rid empty rhetoric of nee-liberalism in search for a more effective political system. Both Modi and Abe have displayed their respective strong work style of nationalism. As described by an essay on the Financial Times, as these strongmen are nationalists instead of internationalists, the world is returning to an era of power politics. All of the above reflects nothing but the fact that the colors of liberalism is fading away in international politics whereas that of realism is on the rise.

A record 18,000 people, the Europeans against the Islamisation of the West (Pegida), turned out at one rally in Dresden, Germany.

ORIGINS OF PREDICAMENTS OF NEOLIBERAL WORLD ORDER

The neoliberal world order has encountered problems mainly because of the problems in mankind’s management of the process of globalization, the problems in distribution of interest and the problems in controlling the speed and direction of globalization.

First of all, from the perspective of grand history, the world economy today is at a period of great shift between old and new driving forces, with increasing downward economic pressure and increasing difficulties in enlarging the “cake” of the global economy. Science and technological and industrial revolutions are the basic dynamics of economic development, bringing about great economic development. However, in the early period of science and technological and industrial revolutions, the world economy more often than notwould experience some labor pains. The Great Depression of 1929 happened after the Second Science and Technological Revolution whereas the Financial Crisis took place in the aftermath of the wave of Third Industrial Revolution. Not only does an important technological revolution change the “function” of production and consumption but also it produces profound effects on social structure, geopolitics and balance of national strengths. If the new trends on the material level are not adapted to on the institutional and conceptual level, the risks of potential social economic crisis will be on the increase. It is more often than not at this stage that various mal-adaptations like lack of drive will happen to global economy. In sum, the period of power shift tends to be a period of outbreak of multiple contradictions and concentrated revelation of problems. It is somehow necessary for globalization to encounter some problems.

Secondly, the advantage of developed countries in Europe and the US in the global industrial chain is on the decline, the blame for which is placed on the process of globalization. As vast emerging markets and other developing countries enjoy rapid development, the “pyramid” structure of the world economy undergoes delayering. As economist Branko Milanovic observes in his new book Global Inequality: A New Approach for the Age of Globalization, in fact, in the process of deepening progress of globalization, global income inequality is continued on downward trend. In another word, the degree of inequality between countries decreases. This shows that the advantage of traditional developed countries in the global industrial chain keeps being weakened. As this in general reduces the quality material life that those countries used to enjoy over past decades, marked by low labor intensity, high income, high social security, a comfort, easy, peaceful and leisured life becoming hardly possible to go on, the “essence, energy, spirit”and national morale keep waning. For this, in some of the countries the blame is place on the process of globalization, leading to popular backlash against globalization.

Third, as inequality between countries wanes, inequality within each of the countries grows, popular discontent builds up. Within capitalist countries, the divide between the rich and poor increasingly widens. In the word of Joseph Stiglitz, America has become a country of the 1%, for the 1% and by the 1%. As the proportion taken by the middle class remarkably contracts, the sense of being exploited and disturbed and the sense of loss among people of the low and middle strata are on the rise. The income of the low 90 percentiles in the pyramid has stagnated for a third of a century. The real medium income of a fulltime male worker is even lower than more than 40 years ago. On the bottom of the society, real wage is basically what it was some 60 years ago. In this round of anti-globalization wave, the popular reaction of the developed countries is even greater than that of the developing countries.

Fourth, it is necessary for the transnational flow of goods, services and capital to bring about that of people, creating a series of thorny issues on the profound plane like interest distribution, integration of immigrants and melting of cultures. On the one hand, the sizable inflow of people squeezes jobs in hosting countries and the sizable inflow of refugees and immigrants adds social economic burden to local societies, shocking and disturbing the life of“original residents”. On the other, transnational inflow of people shocks social order of hosting countries, creating issues of immigrant integration and national melting. In 2015, across the globe, there were 250 million immigrants and 60 million displaced people. Europe accepted the most of the immigrants, as many as 76 million, resulting in the continent of Europe becoming the region most concerned about the immigrant issue. As Fareed Zakaria, host of CNN’s Fareed Zakaria GPS observed,“Mass migration, the ultimate form of globalization is deemed aggressive and subversive in nature, because the general public of the hosting countries are faced with living foreigners rather than some abstract concept. Those foreigners look differently, with different accents and having different habits of life. All this can induce racism and xenophobia. Of course not all of the reactions are harmful, but it should be noted that if the pace of change is too fast, it will be difficult for the society to absorb.” The popular anger on this issue has built up in the US and Europe for long. The refugee issue of the past two years is but a direct fuse, the “build-a-wall” thinking gaining general traction in the US and various European countries.

ACTIVELY LEADING THE WAY OF DEVELOPING WORLD ORDER

The neoliberal world order and the process of globalization have encoun-tered many problems. However, the process of mankind in movement for each to make up what the other lacks is irreversible and so also is the tendency of science and technology reducing the cost of human communication. Neither thorough resistance to the process of globalization nor total laissez-faire of it is a scientific approach. We should continue to promote the process of globalization and at the same time, in order to make it more balanced, inclusive and benefiting all, we should keep “taming globalization”. In the process, China has a sizable room to make proactive actions, mainly in following aspects.

First, it is necessary to call for transcending the limits of neoliberal thinking, seeking point of balance between countries, regions and across the global and doing a good job in controlling the direction and tempo of globalization. In the process of globalization, conditions of economic benefit varying greatly between different countries and among different groups of people in a given society. At the same time, as a historical process, the path to globalization cannot always be even and straight forward. Today, as globalization is in twists and turns, we should particularly gain a profound understanding of the nature of globalization and its negative derivative results. It is not necessarily helpful to regional cooperation and globalization process to neglect national interest whereas it is more helpful to the development of international economic cooperation to strike a balance between national interest, regional interest and global interest. As Mr. Klaus Schwab, Executive Chairman of the World Economic Forum remarked, “Free trade remains the most powerful driver of global economic development and social progress. The challenge for leaders today is to confront protectionism but they also have a duty to make trade a source for more inclusive growth.”

Second, it is necessary to further enhance the appeal of China’s development path by carrying forward domestic reform. The rise of “de-globalization”wave reflects the intensified division between of the rich and poor on global scale. As a world, universal phenomenon, it exists to a degree in China, too. However, comparing to Western countries, the measures taken by China are more pragmatic and forward looking. Since the 18th CPC National Congress, the CPC Central Committee has coordinated the implementation of the 13th Five-year Plan (2016-2020) that consists of economic, political, cultural, social, and ecological development and the Four-Pronged Comprehensive Strategy that consists of comprehensively building a moderately prosperous society, comprehensively deepening reform, comprehensively advancing the lawbased governance of China, and comprehensively strengthen Party self-discipline. Through a series of important measures such as deepening goodgovernance construction, carrying out struggle against corruption and conducting precision poverty relief, it has seen to it to take care of people’s interest, achieve social justice and equity to the maximum and to increase people’s sense of participation, gain and happiness. Important measures and concepts like the supply-side reform and that“houses are for living in, not for speculating” all put on display the strategic thinking on coordinated handling of justice and efficiency.

Third, it is necessary to accurately assess the development trend of globalization and to actively provide public goods with “self-hematopoietic function”. A look at the world trends reveals that the emerging markets and other developing countries may lead a new round of globalization that is different from globalization led by the West. The Belt and Road is an important exploration. First of all, the Belt and Road neither seeks the establishment of binding institutional mechanisms nor resorts to traditional maneuvering for economic cooperation. Rather, it takes “connectivity” for core element, seeks a twowheel-drive of institutional construction and pragmatic cooperation and aim to resolve “non-neutral” issues in globalization and international institutions. Secondly, the Belt and Road transcends the set model of international economic cooperation that lopsidedly stresses on trade at the cost infrastructural construction, including not only trade cooperation but also coordinated progress of connectivity covering five major areas of interest: policy coordination, infrastructure construction (including railways and highways), unimpeded trade, financial integration and peopleto-people ties. It sets store by cooperation in infrastructure and production capacity. It is capable of helping heartland countries of Eurasia continue to nurture industrial chain, industrial base and economic center and to improve their ability to advance economic development. Third, the Belt and Road emphasizes that finance should better serve real economy. Both the Asian Infrastructure Investment Bank and the Silk Road Fund are focused on the theme of infrastructural construction, which helps reduce detachment of virtual economy from real economy and prevent largescale financial bubble from happening. Fourth, the Belt and Road stresses on the principle of opening and inclusiveness and attaches importance to dredging channels and building bridges for international economic cooperation on different levels and between various regions. By thus resolving the logical contradiction between globalization and regional integration, it induces both of them to be inclusive to each other and to promote progress of each other.

Fourth, it is necessary to stick to the thinking of promoting development by cooperation and promoting security by development. In concrete terms, it is necessary to uphold the international development outlook of equity, openup, comprehensiveness and innovation, to promote cooperation of the international community on a more profound level, to strive to remove the soil that breeds terrorism and extremism and to actively achieve a benign situation where development and security mutually promote each other. At the same time, it is necessary to insist on a security approach of common, comprehensive, cooperative and sustainable security, to endeavor to dissolve and fuse security system of the West and to strengthen communication with major world powers so as to safeguard world peace andstabilities together.

10.19422/j.cnki.cn10-1398/d.2017.03.012