The Problems Liberal Democracies Face: Information And Economics

by: John M. Mason

More and more efforts are being made to discover the sources of the economic and political discontent that exists within the world today.

I believe that the search for causes is too narrow and produces conclusions that pit one group of people against another.

The drivers of history have been the spread of information and economic globalization, which means that the answer to our problems rests with inclusive solutions, not group warfare.

Two articles in the Financial Times caught my attention this weekend, basically because they deal with questions relating to current issues in economics and politics that people are desperately seeking solutions.

The first article is a book review by Martin Wolf, the chief economics commentator of Financial Times.

Mr. Wolf reviews a book by Jan Zielonka titled “Counter-Revolution: Liberal Europe in Retreat.”

The basic idea of the book is that Europe is going through a counter-revolution because “the liberal project” of “deregulation, marketization and privatization” has failed too many people and these people are not going to just stand by without doing anything about it.

Mr. Zielonka argues “we have had too many losers, even within economically successful countries and still more in the crisis-hit ones.”

The other article looks at the same issues in another way. The weekly “Lunch with the FT” this week is with the author JD Vance, the author of the best selling book “Hillbilly Elegy.” The Financial Times writer Shawn Donnan has lunch with Mr. Vance and discusses his life and his book.

The title of the article includes the insight “the people calling the shots really screwed up.” In other words, the “elites” of the world, the United States, left behind many people in “the heart of deindustrialized America” and these people, feeling ignored, have risen up to demanding to be heard.

These two articles are just a part of the much bigger examination going on of the events in Europe and America in hopes of identifying the cause of the discontent, which, hopefully, will lead to an end to the suffering and an end to the division that being experienced in these areas of the world.

In my view, the focus of these efforts is too narrow. By just focusing upon the Liberal failure or the isolation of the “elite” I think we are losing sight of what is really happening and directing blame at one particular class or another.

As I have written about many times before, I believe that the driving forces are not new, but have picked up speed as the technology has supported such an increase. To me, the two major forces driving history are the spread of information and the economic globalization that follows it.

Let me give two references that I use to support my position. The first is by MIT professor César Hidalgo and his book “Why Information Grows.” His argument is that the world is in a constant disequilibrium and that the world responds to this disequilibrium by generating information that works to resolve the disequilibrium and advance knowledge and knowhow. But, knowledge and knowhow scales and through connectivity and networks the world advances and becomes wealthier and more complex.

Mr. Hidalgo argues that this is the way the world works and that we must adjust to it because it cannot be stopped.

Another book that supports this argument in its own way is the just released book by the well-known historian Niall Ferguson titled “The Square and the Tower.” It is about the evolution of networks and connectivity in the world. Mr. Ferguson presents many stories about how information is created and grows and the impacts this has on the building of networks and global economic connections. Again, the implication is that this process cannot be stopped and must be worked with rather than worked against.

Mr. Ferguson also provides many stories about those that are harmed by the growth and spread of information. That is just a part of the history, like what we are experiencing today, and these stories relate to how culture and society adjust to all the advancements going all in all ages.

The lesson is that, historically, people get left behind as times move on. And, as Mr. Wolf quotes Mr. Zielonka, the disposed “offer no credible answers” and their record in office is “disquieting, to put it mildly.” “They are a natural response to insecurity: the politics of fear triumphing over the politics of hope.” Hence, the counter-revolution.

No one can control the spread of information. And, no one can control globalization. As Mr. Wolf argues “national democracies cannot control a transnational market economy.”

Thus, if these forces cannot be stopped, the focus must be directed upon how those benefitting from the spread of information and the growth in globalization can work to include those that suffer from these advancements.

Mr. Zielonka, therefore, provides the only possible solution to this dilemma: “the liberal forces must show that the elites and the people can work together for common causes.”

In other words, what needs to be done to make the modern world we are evolving into “more inclusive”?

Tax cuts and infrastructure spending will not solve the problem.

Mr. Zielonka, almost in despair, believes that we must trust “the ability of a younger networked generation to renew the liberal project.” However, there are few specific suggestions as to how this might be done.

And this is the problem. We respond to the situation by saying that there needs to be better educational opportunities, a different educational structure, the opportunity for life-time education, a guaranteed minimum income, greater individual mobility, and so on.

But, we get few specifics as to programs, and, anyway, these all are longer-run solutions, they take time and politicians don’t really like programs that won’t produce results until after the next election or beyond.

This, however, appears to be the economic and political issue of the future. With the growing political unrest results from the problem, they cannot continue to get kicked off into another time. The solution will not be found in the disenfranchised staging of a counter-revolution that proposes the same kind of programs that got us into the situation we now find ourselves in. We cannot hold off the future. China and others will not let us try to stop history.

And, this statement leads us to another point. The precise form of government to succeed in this environment may be of many forms. This, I believe, we must accept. The driving force in the world will continue to be, as it always has been, competition. Although there are many things that China does that I don’t agree with, China has had to compete in world markets and as a consequence has opened up way more than might have ever been expected in the past. My belief is that it will open up more in the future.

But, we must be able to continue to compete against the Chinese, and this means, I believe, that we are going to have to put much more effort into finding ways to move into the technological culture of the future in a manner that includes more and more people. If you will, “the elites and the people” must find more ways to work together in “common causes.”

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.