Smog in Beijing. Photo: Getty
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Life after west: Influencing Tomorrow by Douglas Alexander and Ian Kearns

The era of global liberalism ended in crisis and retreat and world power is now shifting east. How does our foreign policy adapt?

Influencing Tomorrow: Future Challenges for British Foreign Policy
Edited by Douglas Alexander and Ian Kearns
Guardian Books, 224pp, £12.99

The era of liberal globalism that spanned the two decades between the fall of the Berlin Wall and the fall of Lehman Brothers was supposed to usher in a post-historical utopia of expanding wealth and freedom based on the spread of western norms. Instead it will be remembered as an age of hubris in which the faith of our leaders in their ability to remake the world using free markets and military power ended in crisis and retreat. The world taking its place is one in which power is migrating east and the basic principles of political and economic organisation are once again ideologically contested.

Western leaders have been reluctant to acknowledge the scale of this shift, preferring to talk about the rise of Asia and the developing world generally as if it was an interesting new business opportunity rather than the systemic challenge it truly is. So, it’s refreshing to find in Douglas Alexander, Labour’s foreign secretary in waiting, a politician willing to grapple with the more unsettling implications of this emerging world order.

The essays presented in Influencing Tomorrow, edited jointly by Ian Kearns, set out a daunting list of challenges. The US is pulling back from traditional commitments and pivoting towards Asia. A more assertive Russia is “leaving the west” and rejecting its values. The Arab spring has enfranchised Islamist forces, exposing the narrowness of the UK’s regional alliances and its dependence on declining military power. The EU remains beset by political and economic crisis and increasingly dominated by Germany. Dangerous climate change is already unavoidable and there is no agreed plan to prevent it reaching catastrophic levels.

The highlight is Mark Leonard’s analysis of China, in which he punctures the liberal assumption that rising prosperity and deeper integration into the world economy would lead ineluctably to democratic change. China has instead found new ways to shore up its authoritarian model, channel popular sentiment and turn the internet to its advantage. Even at an international level, “China’s participation in global institutions has hollowed out many of the progressive norms rather than ‘socialising’ China.”

Leonard’s solution is to “China-proof” the UK and the west by working more closely with allies, pressing ahead with Euro-Atlantic integration and, in a departure from free-trade orthodoxy, insisting on tougher conditions in trade deals with Beijing. Alexander falls short of endorsing Leonard’s more provocative conclusions but is right to focus on the need for more multilateral engagement. Even this presents difficulties in a country where the two loudest voices are currently the anti-European right pressing for disengagement and the post-Iraq left that remains suspicious of the US.

There are, the editors concede, significant gaps in their coverage. Given that they acknowledge the importance of “developing a model of capitalism that generates wealth, promotes fairness and protects the environment” in restoring lost western influence, it is a shame they could find no space to explore the scope for global economic reform to contribute to that goal.

Economic recovery on its own will buy limited additional influence if conditions of social recession persist because soft power comes from being the kind of country others wish to emulate. With economic stagnation, social division and political disillusionment the new western norm, we are a long way from the time when George W Bush could declare democratic capitalism to be the “single sustainable model for national success”. Now that Ed Miliband has made responsible capitalism a major political dividing line, this should be natural territory for Labour to explore. Perhaps a further volume could take this as its starting point.

David Clark is the editor of shiftinggrounds.org and served as Robin Cook’s special adviser from 1997 to 2001

David Clark was Robin Cook’s special adviser at the Foreign Office 1997-2001.

This article first appeared in the 19 February 2014 issue of the New Statesman, The Space Issue

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The Autumn Statement proved it – we need a real alternative to austerity, now

Theresa May’s Tories have missed their chance to rescue the British economy.

After six wasted years of failed Conservative austerity measures, Philip Hammond had the opportunity last month in the Autumn Statement to change course and put in place the economic policies that would deliver greater prosperity, and make sure it was fairly shared.

Instead, he chose to continue with cuts to public services and in-work benefits while failing to deliver the scale of investment needed to secure future prosperity. The sense of betrayal is palpable.

The headline figures are grim. An analysis by the Institute for Fiscal Studies shows that real wages will not recover their 2008 levels even after 2020. The Tories are overseeing a lost decade in earnings that is, in the words Paul Johnson, the director of the IFS, “dreadful” and unprecedented in modern British history.

Meanwhile, the Treasury’s own analysis shows the cuts falling hardest on the poorest 30 per cent of the population. The Office for Budget Responsibility has reported that it expects a £122bn worsening in the public finances over the next five years. Of this, less than half – £59bn – is due to the Tories’ shambolic handling of Brexit. Most of the rest is thanks to their mishandling of the domestic economy.

 

Time to invest

The Tories may think that those people who are “just about managing” are an electoral demographic, but for Labour they are our friends, neighbours and the people we represent. People in all walks of life needed something better from this government, but the Autumn Statement was a betrayal of the hopes that they tried to raise beforehand.

Because the Tories cut when they should have invested, we now have a fundamentally weak economy that is unprepared for the challenges of Brexit. Low investment has meant that instead of installing new machinery, or building the new infrastructure that would support productive high-wage jobs, we have an economy that is more and more dependent on low-productivity, low-paid work. Every hour worked in the US, Germany or France produces on average a third more than an hour of work here.

Labour has different priorities. We will deliver the necessary investment in infrastructure and research funding, and back it up with an industrial strategy that can sustain well-paid, secure jobs in the industries of the future such as renewables. We will fight for Britain’s continued tariff-free access to the single market. We will reverse the tax giveaways to the mega-rich and the giant companies, instead using the money to make sure the NHS and our education system are properly funded. In 2020 we will introduce a real living wage, expected to be £10 an hour, to make sure every job pays a wage you can actually live on. And we will rebuild and transform our economy so no one and no community is left behind.

 

May’s missing alternative

This week, the Bank of England governor, Mark Carney, gave an important speech in which he hit the proverbial nail on the head. He was completely right to point out that societies need to redistribute the gains from trade and technology, and to educate and empower their citizens. We are going through a lost decade of earnings growth, as Carney highlights, and the crisis of productivity will not be solved without major government investment, backed up by an industrial strategy that can deliver growth.

Labour in government is committed to tackling the challenges of rising inequality, low wage growth, and driving up Britain’s productivity growth. But it is becoming clearer each day since Theresa May became Prime Minister that she, like her predecessor, has no credible solutions to the challenges our economy faces.

 

Crisis in Italy

The Italian people have decisively rejected the changes to their constitution proposed by Prime Minister Matteo Renzi, with nearly 60 per cent voting No. The Italian economy has not grown for close to two decades. A succession of governments has attempted to introduce free-market policies, including slashing pensions and undermining rights at work, but these have had little impact.

Renzi wanted extra powers to push through more free-market reforms, but he has now resigned after encountering opposition from across the Italian political spectrum. The absence of growth has left Italian banks with €360bn of loans that are not being repaid. Usually, these debts would be written off, but Italian banks lack the reserves to be able to absorb the losses. They need outside assistance to survive.

 

Bail in or bail out

The oldest bank in the world, Monte dei Paschi di Siena, needs €5bn before the end of the year if it is to avoid collapse. Renzi had arranged a financing deal but this is now under threat. Under new EU rules, governments are not allowed to bail out banks, like in the 2008 crisis. This is intended to protect taxpayers. Instead, bank investors are supposed to take a loss through a “bail-in”.

Unusually, however, Italian bank investors are not only big financial institutions such as insurance companies, but ordinary households. One-third of all Italian bank bonds are held by households, so a bail-in would hit them hard. And should Italy’s banks fail, the danger is that investors will pull money out of banks across Europe, causing further failures. British banks have been reducing their investments in Italy, but concerned UK regulators have asked recently for details of their exposure.

John McDonnell is the shadow chancellor


John McDonnell is Labour MP for Hayes and Harlington and has been shadow chancellor since September 2015. 

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump