Uncertainty in the BRICS

The nature of today's economy is uncertainty, and nowhere is that more true than in developing nations.

In the third of these linked blog posts, we return to the general theme of "The Great Uncertainty" to explore the consequences of the shift in the balance of economic power that many discern, broadly from ‘West’ to ‘East’. The issues, we suggest, are rather more complex and involved than we are typically led to believe in popular accounts couched in terms of ‘rising powers’ and the challenge of the BRICS economies.

So where to start? Well, what is clear to us is that there is indeed a shift taking place in the balance of global economic power. That, at least, we can agree on. There is no need, we feel, to fill this post with figures because the broad picture is pretty well established. Indeed, it is captured, after a fashion, in those speculative pieces that we have all read about exactly when China will overtake the US as the largest economy in the world (although this, too, is more complicated a calculation than is often recognised).

The essential point, though, is that the combination of longish periods of (very) fast economic growth in some countries with slow growth, stagnation and recession in others cannot but alter the respective weights of different countries (and by extension regions) within the global economy. It is from that core shift that all the other features that are so much discussed – different patterns of FDI, aid, trade, bond purchases and the like – emanate.

However, the analytical problem is that economic power does not translate easily or automatically into political power. Or, to put it a little differently in what has been a common theme of ours, economics is not political economy. Economic power can be measured statistically by reference to GDP, proportion of world trade, level and direction of financial flows, and so on. Political power cannot. It has instead to be pondered and probed.

What do we find when we do this? Let’s start with China. In a simple sense it is the most obvious candidate to replace the US as the hegemon of the global political economy. But, for all its fast and continuing economic growth, it is in fact beset by a host of problems generated by its particular experience of late industrialisation and single-party politics. These include: a core imbalance in its economy between investment and consumption, considerable ongoing financial instability, deep social inequalities and tensions, and the confusion about intentions inevitably generated by its opaque and increasingly corrupt state structure. And this is not even to mention the big, looming issue of being pressured to move at some point in a democratic direction.

The reality is that, for all the talk a while ago of an emerging "Beijing Consensus", China has yet to produce a style of capitalism that is globally attractive.

Let’s move on to think about India, Brazil and other ‘rising powers’. Here, once more, the political picture is much less sharply defined than the economic one. In global terms India still lives mostly within itself. It has a very strong historical sense of the uniqueness of its continental civilisation and seems content for the moment to deploy an assertively ‘Southern’ rhetoric amidst broad acquiescence in a US-centred world order.

Brazil is best seen politically as the major regional power of South America. Given its location and history, it is always alert to the possibility of overbearing behaviour by the US and is ready to be stroppy if necessary. But it has yet to set out a coherent and convincing account of the global role that it might like to play in the future.

We could at this point go further on down a list to discuss Russia, South Africa, Mexico, Indonesia, even Turkey. But we already know that we are referring here to countries that have a power and a presence in global politics, without yet constituting major players when it comes to shaping policy outcomes in the UN, the IMF, the WTO or any other global, as opposed to regional or ‘Southern’, institution.

In a very interesting recent article, the veteran Indian political scientist, Achin Vanaik, has argued that what is emerging is a ‘new pentarchy’, consisting of the US, the EU, Russia, China and India. Others don’t quite make the grade. In his view, such a pentarchy will not be formalised like the G8 and G20. Nor will it be a concert of equals or near-equals, but rather a hub-and-spokes arrangement with the US at the centre and the others at the circumference.

Vanaik advances this proposition on the basis of an attempt to integrate economic and political power into his thinking. All his five entities have sufficient demographic, economic and military weight to qualify, as it were, but only the US has the soft – or ideological – power to ‘project a social-political-cultural model that is potentially generalisable’. He asks tellingly: ‘How many states and their ruling and middle classes want to become more and more like Russia, China or India rather than like the USA?’ What about the EU in this context? It is dismissed in a single brutal phrase: ‘The EU by its very nature cannot be a single unified aspirational model’.

Now, this is but one recent piece of political analysis. It’s quite persuasive in its way, but things almost certainly won’t work out in quite the manner that Vanaik suggests, and that is really the key point. Political economy analysis is contentious stuff. We don’t ever stand on especially firm ground. We make judgements, and then see how events unfold, adjusting our thinking as we go. Economic power in the world is shifting, but we can’t be certain quite what that will mean politically over the next few years and that just reinforces the sense of the uncertainty of the times in which we live.

This is the third in a five-post series on the "Great Uncertainty".

Professors Colin Hay and Tony Payne are Directors of the Sheffield Political Economy Research Institute at the University of Sheffield.

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Chuka Umunna calls for "solidarity" among Labour MPs, whoever is voted leader

The full text of shadow business secretary Chuka Umunna's speech to Policy Network on election-winning ideas for Labour's future, and the weaknesses of the New Labour project.

There has never been an easy time to be a social democrat (or “democratic socialist” as we sometimes call ourselves in Britain). Whereas the right can demonise the poor and extol the virtues of the market, and the hard left can demonise the market and extol the role of the state, our position of constraining the domination of markets and reforming the state is, by definition, more complex.

It is nonetheless the case that social democracy has a historic responsibility, in every generation, to renew democracy and preserve a civic culture. This is achieved not through soundbites and slogans, but through the hard-headed development of a progressive politics that reconciles liberty and democracy, new comers and locals to our communities, business and workers, in a common life that preserves security, prosperity and peace.  This historic mission is all the more urgent now and my determination that we succeed has grown not weakened since our election defeat last May.

But, in order to be heard, it is necessary to make balanced and reasonable argument that both animates and inspires our movement, and which is popular and plausible with the people.  The first is pre-requisite to the second; and there is no choice to be made between your party’s fundamental principles and electability. They are mutually dependent - you cannot do one without the other.

We are in the midst of choosing a new leader and it is clear to anyone who has watched the UK Labour Party leadership election this summer that amongst a significant number there is a profound rage against Third Way politics – as pursued by the likes of Bill Clinton, Tony Blair, Gerhard Schröder and others - as a rejection of our fundamental values.

In the UK there is a view that New Labour accepted an uncritical accommodation with global capital that widened inequality, weakened organised labour and we were too close to the US Republicans and too far from the European left.

I do not believe this is fair, not least because we rescued many of our public services from the scrap heap when we came to office in 1997 and there were very significant achievements  we should celebrate.  New Labour renewed our National Health Service in a fundamental way; we built new schools and improved existing ones; we set up new children’s centres all over the country; we brought in a National Minimum Wage; we worked with others to bring peace to Northern Ireland; we introduced civil partnerships.  Just some of our achievements.

However, though we may take issue with the critique, I do not think we can simply dismiss out of hand those who hold critical views of New Labour. Like any government, the New Labour administration made mistakes - it could and should have achieved more, and done more to challenge the Right’s assumptions about the world. In the end, it is not unreasonable to be ambitious for what your party in government can achieve in building greater equality, liberty, democracy and sustainability. It is far better we acknowledge, not reject, this ambition for a better world, as we seek to forge a new politics of the common good fit for the future.

Realising our values in office has been disrupted by globalisation and the surge of technological forces that are displacing and reshaping industry after industry.

Some argue that globalisation as an ideological construct of the right. But we must recognise that we live in an increasingly integrated world in which markets have led to an unprecedented participation of excluded people in prosperity, a rise in living standards for hundreds of millions  of people and a literacy unprecedented in human history – this is particularly so in emerging economies like my father’s native Nigeria. And the internet has led to a level of accountability that has disturbed elites.

Yet, this has been combined with a concentration of ownership that needs to be challenged, of a subordination of politics that requires creative rather than reactive thinking, and these global forces have exacerbated inequalities as well as helped reduce poverty.

So it is important that we understand the sheer scale and impact of new technologies. At the moment we are engaged in a debate about Uber and its threat to one of the last vestiges of vocational labour markets left in London, those of the black taxi cabs and their attainment of 'The Knowledge'. But the reality is that within the next decade there will be the emergence of driverless cars so we have to intensify our exploration of how to support people in a knowledge economy and the realities of lifelong learning, as well as lifelong teaching. As people live longer we will have to think about how to engage them constructively in work and teaching in new ways.

Once again, I'm addressing all of this, Social Democracy requires a balanced view that domesticates the destructive energy of capital while recognising its creative energy, that recognises the need for new skills rather than simply the protection of old ones. A Social Democracy that recognises that internationalism requires co-operation between states and not a zero sum game that protectionism would encourage.

Above all, Social Democratic politics must recognise the importance of place, of the resources to be found in the local through which the pressures of globalisation can be mediated and shaped. Our job is to shape the future and neither to accept it as a passive fate nor to indulge the fantasy that we can dominate it but to work with the grain of change in order to renew our tradition, recognising the creativity of the workforce, the benefits of democracy and the importance of building a common life.  Sources of value are to be found in local traditions and institutions.

This also requires a recognition that though demonstration and protest are important,; but relationships and conversations are a far more effective way of building a movement for political change.

One of the huge weaknesses of New Labour was in its reliance on mobilisation from the centre rather than organising. It therefore allowed itself to be characterised as an elite project with wide popular support but it did not build a base for its support within the party across the country, and it did not develop leaders from the communities it represented. It was strong on policy but weak on strengthening democratic politics, particularly Labour politics.

Over half a million people are now members, supporters or affiliated supporters of our party, with hundreds of thousands joining in the last few weeks. Some have joined in order to thwart the pursuit of Labour values but many more have joined to further the pursuit of those values, including lots of young people. At a time when so many are walking away from centre left parties across the Western world and many young people do not vote let alone join a party, this is surely something to celebrate.

So it is vital that we now embrace our new joiners and harness the energy they can bring to renewing Labour’s connection with the people. First, we must help as many them as possible to become doorstep activists for our politics. Second, I have long argued UK Labour should campaign and organise not only to win elections but to affect tangible change through local community campaigns. We brought Arnie Graf, the Chicago community organiser who mentored President Obama in his early years, over from the U.S. to help teach us how to community organise more effectively. We should bring Arnie back over to finish the job and help empower our new joiners to be the change they want to see in every community – we need to build on the links they have with local groups and organisations.

I mentioned at the beginning that in every generation Social Democracy is besieged from left and right but the achievements of each generation are defined by the strength of a complex political tradition that strengthens solidarity through protecting democracy and liberty, a role for the state and the market and seeks to shape the future through an inclusive politics. Solidarity is key which is why we must accept the result of our contest when it comes and support our new leader in developing an agenda that can return Labour to office.

Yes, these are troubled times for social democrats. All over Europe there is a sense among our traditional voters that we are remote and do not share their concerns or represent their interests or values.  There is surge of support for populist right wing parties from Denmark to France, of more left wing parties in Greece and Spain and in Britain too. There is renewal of imperial politics in Russia, the murderous and abhorrent regime of ISIL in the Middle East, volatility in the Chinese economy and in Europe a flow of immigration that causes fear and anxiety.

But, the task of Social Democracy in our time is to fashion a politics of hope that can bring together divided populations around justice, peace and prosperity so that we can govern ourselves democratically. We have seen worse than this and weathered the storm. I am looking forward, with great optimism to be being part of a generation that renews our relevance and popularity in the years to come.

Chuka Umunna is the shadow business secretary and the Labour MP for Streatham.