The era when liberal democracy triumphed over fascism and communism may have ended in 2016, with Brexit and Donald Trump’s election as US President. Voters across the globe hve rebelled against a liberal democratic system that no longer meets their aspirations. They desperately seek extreme, even gross solutions. This is a civilisational crisis.
In India, the rise of Kejriwal (and perhaps Modi) is also a revolt against the old corrupt politics. Note: these new leaders have produced no instant answers to thwarted aspirations. That’s proved by job reservation agitations by aspirational castes like Patels (Gujarat), Marathas (Maharashtra), Jats (Haryana) and Ahoms (Assam).
In the 20th century, people in liberal democracies assumed living standards would rise constantly. But after decades of stagnant wages and economic growth benefiting mostly a small plutocracy, Western citizens are lashing out against conventional political and economic nostrums. In the film “Network” a TV anchor urges people to yell, “I’m mad as hell, and I’m not going to take it any more.” That’s today’s mood too.
When things don’t improve despite changes of government, the veneer of civilization peels off and dark passions blow to the surface. Surly voters take refuge in conspiracy theories, blaming all ills on foreigners, immigrants, ivory-tower experts, minorities and other hate objects. Racist, religious and ethnic animosities flare up. Countries turn inward politically and economically. Globalisation seems a threat, not an opportunity.
However, protectionism and immigration controls (implicit in votes for Brexit and Trump) cannot re-create the old days of ever-rising wages. A great mega-trend, invisible to most voters, is sharply falling productivity across the globe. In arguably the best non-fiction book of 2016 — The Rise and Fall of American Productivity — economist Robert Gordon argues that electricity and the internal combustion engine truly revolutionized productivity for 150 years, but are now a spent force. No new innovation, not even the internet, has raised productivity enough to compensate for the end of the 150-year bonanza. Voters simply cannot accept that the unseen bonanza of 150 years is over and won’t be replaced. Instead they seek bogus populist solutions from the Left (Sanders, Corbyn) and Right (Trump, Farage, Le Pen). Opinion polls show a rising acceptability of even non-democratic solutions.
The wage-cum productivity boom of Western workers flowed from their being first in the industrial revolution. Developing countries were left far behind, and hobbled by colonialism. But in recent decades, developing countries are catching up fast in skills and competitiveness. Chinese and Indian workers are almost as productive as American or European ones, at half to a quarter of the wages. Most outsourced jobs can return to the West only if western wages are halved. Supporters of Trump and Brexit are going to be disappointed.
Further aggravations come from automation. Driverless cars, artificial intelligence and other such innovations now threaten two thirds of existing jobs.
Finally, the rise of vitriol-filled social media has created closed-opinion loops that eliminate rival views, promote narcissistic grievances, and stoke crude fundamentalism of every sort. A “post-truth” society is emerging where independent fact-checkers are sneered at and fundamentalist opinions are seen as the revealed truth. Adding to the fuel is fake news, the generation of totally fictitious reportage to promote the agenda of sundry groups. The US alt-right, the far right in France and Holland, and Islamic fundamentalists have all gained at the expense of the liberal centre.
In this gloomy scenario, India’s prospects look surprisingly strong. It lags so far behind China and the West that it has huge catch-up possibilities in productivity for decades. The West and China now face shrinking working-age populations, and have reached the limit on female workforce participation at 60-65%. But India’s workforce growth will continue till at least 2050-2060, and its female workforce participation rate of 22% can triple. Provided governance improves — a big if — productivity and GDP can grow reasonably fast for decades.
The main challenges are institutional and civilisational. Can India rise above vote-banks politics, a moribund police-judicial system, and terrible political and business morality? You may laugh, given continuing violence in Kashmir and the Maoist belt, no judicial or administrative reform, continuing massive corruption (despite Modi’s efforts in New Delhi), and rising illiberalism (murder of rationalists, rise of cow-protection vigilantes). Optimists hope demonetization will usher in a new morality. You can hope for anything.
India may still grow faster than others. But it will be the one-eyed king in the land of the blind.
