Neo-liberalism's inherent flaws and contradictions have created mountainous debt and numerous socio-economic dysfunctions which have left the world’s economic and financial systems dangerously exposed
ADELAIDE - As an historian I am very wary about trying to predict the future based upon what has happened in the past or even what is happening in the present.
The record of those who predict the future with confidence is that they have been almost invariably wrong.
Still, it is sometimes possible to recognise historic trends that have emerged or are emerging and so, bearing those remarks, it is with some trepidation I offer a few suggestions about our collective likely future.
It seems to me that an obvious historic change now emerging is the slow death of what is commonly called neo-liberal capitalism.
By this I mean capitalism that is largely unregulated or poorly regulated resulting in gigantic international corporations dominating critical areas of economic activity.
The basic theory underlying neo-liberalism is that if governments wind back regulatory ‘red tape’ and do not interfere with the operations of the market, then the wealth-creating potential of capitalism will be unleashed resulting in an improvement in living standards for everyone through a so-called ‘trickle-down effect’.
Importantly, neo-liberalism insists that society’s needs must be subordinated to the rights of individuals except in tightly prescribed circumstances.
Thus neo-liberals are vehemently opposed to trade unionism because it seeks through collective action to correct the gross power imbalance between capital and labour.
The impact of this neoliberalism is perhaps most obvious in the ongoing debate over gun control in the USA.
Here the unfettered right to bear arms is totally inconsistent with the obvious social need for at least some level of regulatory control over the purchase, use and very frequent lethal abuse of guns.
What has actually happened under neo-liberalism is that capital has indeed flowed freely around the globe on its endless search for the cheapest sources of exploitable material resources and labour and, as a consequence, huge profits have accumulated for those corporations and individuals that constitute the owner class.
This process has been called ‘globalisation’ and it is a replay of earlier historic trends whereby capital always flowed to where profits could be maximised.
Wealth has not trickled down to any material degree. Mostly, it has flooded upwards into the hands of the growing class of billionaire venture capitalists like Elon Musk, Jeff Bezos, Richard Branson and many others besides.
Whilst this process indeed lifted people out of poverty, notably in China, this has come at the price of unemployment and under-employment in countries that lost capital to the new industrial and manufacturing centres.
In places like Papua New Guinea, neo-liberalism has resulted in the massive exploitation (and in the case of forestry, over-exploitation) of the country’s resources with very little benefit accruing to the people.
This process has been aided and abetted by the corruption and incompetence of the ruling elite who have literally grown fat upon the proceeds.
There is ample evidence that this is the situation in most developing countries. Very few have been able to leverage their abundance of natural resources to produce a sustainable increase in public benefit.
Now we are witnessing the failure of neo-liberalism because of its inherent flaws and contradictions.
It is a system that has created mountainous debt and numerous asset ‘bubbles’ which now leave the world’s economic and financial systems dangerously exposed.
The world’s central banks and other international financial agencies such as the World Bank and International Monetary Fund have since at least 2007 been grappling with the consequences of 30 years of unfettered financial and economic profligacy across most of the world.
Their efforts have staved off immediate global financial collapse but the recent emergence of rising inflation has severely limited their options for dealing with any new crisis.
It is safe to say that neo-liberalism, and the globalisation it spawned, are in crisis and that a new economic consensus about how the global economy is structured and managed will have to be developed.
Such reforms are certain to include a rebalancing of the roles of government and private enterprise in the control and direction of economies, with government’s resuming their historic role of regulating capitalism to rein in its worst excesses.
This will necessarily be an ugly, protracted and difficult process because those now in control of how wealth is created and distributed will strongly resist efforts to remove from their grasp such a lucrative privilege.
It is also now apparent that the world’s ruling elites have conspicuously failed to take meaningful action to prevent potentially catastrophic climate change.
This means that, in the immediate future, many resources will necessarily be required to deal with the inevitable consequences of this failure.
This is likely to have profound impacts on Pacific Islands nations. Low lying countries like Tonga and Kiribati are at obvious risk from rising sea levels, as will be parts of countries like Fiji and PNG.
Countries like PNG with majestic equatorial rain forests and richly productive highland valleys are also very sensitive to climatic change.
With millions of people in PNG reliant upon subsistence farming to survive, an increase in ambient temperature of two degrees will have a severe impact upon agriculture and food supply.
The situation in equatorial Africa seems likely to become even more dire than it already is.
Even now, there’s a seemingly endless stream of refugees moving from North Africa to Southern Europe, often risking death doing so.
This problem will get much worse as circumstances in Africa continue to deteriorate.
For the foreseeable future at least, governments worldwide will be compelled to devote progressively more effort and resources to manage a process of large scale decarbonisation whilst simultaneously trying to ameliorate the impact of climatic changes that have already begun and will take many decades to reverse.
It’s now very clear that the world’s human population is approaching its peak and that a quite precipitous decline will occur in many countries.
This is already obvious in places like Russia where the population has declined markedly since around 1990 due to a very low birth rate and abnormally high death rate.
There is a similar problem emerging in China, with population growth stalled and the birth rate down to well below replacement level. The long term socio-economic implications of this for China are profound.
PNG has not, as yet, been affected by this problem. In fact, its population has grown hugely since the 1960s. This poses other problems, notably an inability to gainfully employ a large proportion of the potential workforce.
This is both a threat and an opportunity. The main threat lies in whether the combined impact of a global economic contraction, climate change and a burgeoning population may result in food shortages.
The opportunity lies in PNG citizens finding employment in countries experiencing a rapidly declining labour force. In this context, Australia is an obvious potential destination for PNG workers.
The new Australian government seems capable of understanding that a well regulated labour scheme for PNG and other Pacific Islands countries has the potential to both help solve a problem in Australia while becoming a source of capital inflow in workers’ home countries.
It is now plain that nationalism is re-emerging as a significant source of political influence and power, especially in Europe. It lies at the heart of Russian adventurism in Ukraine and is a potent force in other countries as well.
The creation of the European Union was, at least in part, an attempt to marginalise nationalist sentiment as a source of political power.
Europeans collectively, and the French and Germans in particular, regarded virulent nationalism as the root cause to the two world wars of the 20th century which were so traumatic and destructive for their countries. They have since regarded the suppression of ultra-nationalism as a pre-condition for enduring peace.
Unfortunately, virulent nationalism has been reanimated for political purposes and its pernicious effects are once again being felt across Europe. While the likelihood of war seems very remote, the emergence of historic tensions between some European countries is already evident.
Perhaps more concerning, nationalism is now being exploited by Vladimir Putin in Russia and the Chinese Communist Party to galvanise domestic support for their more belligerent posture in international relations.
As has been graphically demonstrated in the war in Ukraine, these forces can lead to untold harm and suffering.
A world in which nationalism is allowed to become a dominant political force is always going to be much more unstable and unpredictable than one in which such forces are tightly constrained.
Overall, the factors I have mentioned lead me to believe that, at least in the short to medium term future, the world will experience much more instability and uncertainty than has been the case since the end of the World War II.
Of course, there will be many positive developments that may offset some of the risks but these remain mostly unknown.
History suggests that we as a species will somehow blunder through but the process of doing so looks likely to be painful for many of us.