Influential author believes neoliberalism is in ‘death throes’ as sluggish growth continues after financial crisis
Martin Jacques believes the G20 summit in Hangzhou is taking place at a crucial time for the global economy.
The British author and academic insists the Western neoliberal orthodoxy that has dominated global economic thinking since the late 1970s is now in its death throes.
This, he argues, is because of its failure to come up with solutions to sluggish global growth eight years after the global financial crisis.
“I think the longer the crisis goes on and it gets more serious – which it may do – and if there is then another crisis as a result of sudden economic shock – then I think it would completely undermine neoliberalism as we have known it,” he says.
“I don’t think it will go tomorrow but I think it will be in its death throes, which might last a long time but by then it would be terminal.”
Jacques, 70, author of the influential best-selling When China Rules the World: The Rise of the Middle Kingdom and the End of the Western World, made his prediction about the death of neoliberalism in an article in The Observer newspaper on Aug 21, which has created a minor media storm and attracted more than 250,000 page views.
“The article has done fantastically well. People say it has trended on Twitter. This is something I have never really understood because I am not a great tweeter,” he laughs.
He says he wanted to highlight in the article that while the outlook for the Western economic system was bleak, China continued to be one of the most robust economies in the world.
“I didn’t have enough space to do this but I wanted to build on the discussions around my book when it was first published in 2009. People were saying then that China would not continue rising – as I had forecast – but would have some big economic crisis unless they made major reforms.
“Well that crisis has never happened. China obviously has lots of problems but it hasn’t faced an economic crisis on anything like in the scale of the West.”
He says that while there were also questions about China’s system of governance it is now that of the West that is under scrutiny and facing serious challenge from anti-establishment figures such as former Democratic candidate Bernie Sanders and Republican nominee Donald Trump in the US presidential election, in particular.
“It is the West that now faces a political crisis. I think that is very revealing. China, broadly speaking, is still in a good place. The basic picture is still rather good for China.
“The underlying reason for the crisis of Western neoliberalism is the fact that wages have stagnated or declined for the American white working class for 40 years. One has to question why they put up with it for so long. They were living in a wealthy country where others were clearly doing very well and they weren’t.”
Jacques, who was speaking from his home in north London, believes the issues all play into the G20 summit, which he argues could be a turning point in the way the world is governed and may see the world’s second-largest economy taking on the mantle of a global leader.
“If China could come up with some strategic initiatives that were accepted by a range of other countries then this summit could turn into a significant moment. Otherwise, it will be a significant moment in a process that is unquestionably pivotal.”
Jacques, who is regarded as one of the UK’s leading left-wing intellectuals, further argues that it is opportune that China is hosting the G20 summit for the first time since many countries are looking for it to take the initiative in finding solutions to global economic issues.
“I think many countries, particularly in the developing world, are now looking for China to take a lead. If you look at what is driving growth in Central Asia, it is China’s Belt and Road Initiative. Similarly, in Africa, it is China investment in infrastructure.
“With new institutions like the Asia Infrastructure Investment Bank, China now sees itself as a mover and shaker of globalization and if you went back only three or four years, you would say that no way that would this be the case.”
Jacques, who was born in Coventry, received a first class honors degree in economics at the University of Manchester before doing a doctorate at King’s College, Cambridge.
He made his name as a journalist, turning Marxism Today into one of the top political magazines in the UK as editor for 14 years from 1977 to 1991.
He later became deputy editor of The Independent newspaper and was also co-founder of Demos, the highly influential left-of-center think tank, in the 1990s.
After taking a serious interest in Asian issues, he moved to Hong Kong in 1998 for a time and also has held a number of academic posts in Asia, including in Japan and Singapore.
He is now a regular contributor to The Guardian, Financial Times and New York Times and is a senior fellow at the department of politics and international studies at Cambridge University.
From this autumn, he will be teaching in Beijing as a visiting professor at Tsinghua University.
Jacques says Chinese GDP growth – although slowing from the double digits of the last decade to 6.7 percent in the second quarter of this year – is still one of the major driving forces of the global economy.
“What has been the remarkable aspect of China’s growth has been that it is a mark of continuity in the global economy. OK, the growth rate is not what it was but at between 6 and 7 percent it is still remarkable in the present conditions. It is second only to India but India has greater growth possibilities because it is much more backward.”
The author believes that initiatives such as the AIIB and the Belt and Road Initiative have the potential to reshape the world and China’s position within it.
“If these are only 25 percent successful, they will still make a major difference over a 30-year period. There will be a huge mutual benefit for China and Central Asia and South Asia and places like Pakistan, where there has been a particular emphasis,” he says.
“It will also be sending out a signal from China to these countries that you can grow in the same kind of way as we have done through infrastructure development.”
Jacques believes that China, in making the moves that it is making, is presenting an alternative form of globalization.
“It is becoming much more proactive as a globalizing force. It is extending and intensifying the process of its integration with the world economy. China’s challenge is how it can somehow then also reinvigorate and regenerate the possibilities for global growth.”
Jacques believes many countries will increasingly see China as a role model of how to govern a country compared with what he regards as increasingly chaotic and incompetent Western governments.
“I am not saying they will want to copy the Chinese government system. Unless they are a Confucian society such as Vietnam, I think it is very difficult for them to do that. I think it offers interesting lessons, however.
“Governance, by and large, is not competent in the West. This is certainly true of the United States, it’s certainly true of the UK and also much of Europe. China’s governance is much more stable, long-term focused and much more pragmatic.”
He says much of the success of China’s governance is in the way it tests new initiatives.
“Chinese government tries out and experiments with things through pilots in a certain area to see how they work. If they don’t, they abandon them. In Britain, we introduce something that is not just road tested and very often it is all a complete flop.”
Jacques says the G20 summit will be one of the most important events in China since the Beijing Olympics in 2008 and could prove to be a further marker of a changing world.
“The institutions of the American world order are in decline and are increasingly not representative of what the world is. This is the crisis and part of the current global problem.”