Article / 02 August 2016 at 13:30 GMT

Priced out of the 'open society'

Editor / Saxo Bank
  • The Economist calls populist nationalism 'gravest threat since communism'
  • Famed UK publication backs Democrats, calls for Republicans to support Clinton
  • History shows vast, cosmopolitan trade empires are possible but expensive
  • Economic shortfalls can cause pluralist societies to fracture at the seams
  • Elites need to recognise perils of endless intervention, promote reform: Jakobsen

Hillary Clinton speaks in Philadelphia
The Economist comes out in favour of Hillary Clinton, 
says "anti-globalists" must be resisted. Photo: iStock

By Michael McKenna

On Saturday, The Economist published a rather panicked editorial stating that the US presidential contest between Republican Donald Trump and Democrat Hillary Clinton represents “the gravest risk to the free world since communism,” with “the future of the liberal world order” depending on Clinton’s success.

According to the Economist, the current political landscape is one in which the old, “left versus right” divide is being superseded by a “closed versus open” debate in which anti-globalists hoist banners decrying low-to-flat wage growth and economic insecurity while their counterparts campaign under placards cheering pluralism and aggregate global living-standard increases.

On June 23, the United Kingdom landed a major blow against the globalist side by voting to leave the European Union. What was most interesting in the instance was how the ballot broke down: while the cosmopolis that is contemporary London saw a strong majority Remain vote, the rest of England broadly chose to Leave. In Scotland and Northern Ireland, two regions that see significant economic benefits from EU membership, Remain also came out on top but it wasn’t enough to stem the anti-EU tide.

The US election, though, is currently seeing an even broader and stranger realignment in which the Democrats have seized Wall Street’s allegiance from the traditionally high-capitalist Republicans with Clinton receiving $45.8 million in hedge fund donations (according to the Wall Street Journal) while Trump has been given a paltry $19,000.

In addition to the financial sector turnaround, the Democrats have also taken on the support of many George W. Bush-era war hawks as prominent neoconservatives and Iraq war architects such as Robert Kagan, Richard Armitage, Max Boot and others have crossed the aisle to support Clinton.

A ruined house in Damascus
A ruined house in Damascus: Despite the Iraq debacle, Clinton's hawkish supporters hope she will take a more interventionist line in Syria than Obama has done. Photo: iStock

(Clinton’s hawkish bona fides are extensive; she supported the Iraq War, launched the toppling of Libyan leader Moammar al-Gaddafi as Secretary of State, supports the ousting of the Assad regime in Syria, and is deeply critical of Trump’s stated desire for rapprochement with Russian president Vladimir Putin.)

Claims of the current order

Beyond the spectacle of strange bedfellows, though, The Economist feels that we are at an existential turning point. According to the editors, open societies   or “the multilateral system of institutions, rules and alliances, led by America, [that] has underpinned global prosperity for seven decades" – are far preferable to the “xenophobia” and “lower living standards” that characterise, in its view, the nationalist vision.

What is it that The Economist fears might disappear? All social orders orbit central values from which they derive their legitimacy. From the appeasement of Huitzilopochtli under the Aztecs to the “manifest destiny” of the early Americans, all regimes exist to protect certain truth-claims. For globalism, or international liberal democracy, this takes the form of a strong belief in free markets, free trade, and openness towards the sorts of human migrations that such systems inevitably produce.

This final aspect is an interesting one, as the past 24 months have seen a dramatic ramping-up of hate-speech legislation, social media policing, and more broadly the taboo against speaking ill of this or that group – in Germany, for instance, multiple people have been arrested for posting messages critical of that country’s recent migration wave on social media. In Scotland, a 40-year-old man was arrested in February after condemning his country’s decision to welcome Syrian refugees to its shores on Facebook.

The pluralism of the globalist order is one of its great moral self-justifications, but it’s important to remember that it lies significantly downstream of its most central value: free movement of goods, capital, and labour. In our coverage of last year’s Davos summit, we noted that “the World Economic Forum’s solution is essentially to remove barriers to mobility […] in such a world, the rapid movements of jobs and resources would be matched by large-scale population shifts”.

As such, the pluralism of the globalists is a structural component of their economy, which is one reason why laws and taboos against xenophobia, “online hate speech” or anti-immigration statements are such a major topic of late.

(While many societies have allowed their subjects to speak profanely about this or that meaningless thing, very few – historically speaking – have looked favourably on individuals wishing to strike at the heart of their economic order.)

While it remains The Economist’s prerogative to champion its vision of international free-market democracy, as well as to castigate its insurgent rival, there remain a few problems that its recent editorial does not address.

How free is free?

First, there is the issue of free markets. While The Economist decries protectionist measures in general and Trump’s opposition to certain nascent trade deals (such as the Trans-Pacific Partnership) specifically, it is relatively silent on other, more familiar forces warping free markets across the developed world.

“If The Economist believes so strongly in free markets, why does it accept central bank measures and [overall policies] that distort that very market?” asks Saxo Bank chief economist Steen Jakobsen.

Federal Reserve
At the gates of the Atlanta Fed: Central bank policy is driving markets to an unprecedented degree, reflecting a profound uneasiness about the world economy. Photo: iStock

“Free markets bring about a sequence of business cycles; currently, however, we are trying to avoid engaging the real business cycle as that would mean losses and change.”

According to Jakobsen, “the endless intervention” seen since the financial crisis of 2008-9, “continues to crowd out the very change and much-needed benefits that unhappy voters crave”.

Collusion and consensus

Which brings us to the latter part of the “free-market democracy” equation: the voters. For while The Economist maintains an admirable commitment to the power of the ballot, exhorting politicians to make a stronger case for globalisation in light of its populism-spurring failures, it is not above recommending a degree of strategic manipulation in defense of its favoured system.

“In the Netherlands and Sweden,” says the British publication, “centrist parties have banded together to keep out nationalists.” In light of this success and of the upcoming French elections, The Economist further notes that “a similar alliance defeated the National Front’s Jean-Marie Le Pen in the run-off for France’s presidency in 2002”, advising that such a move “may be needed again to beat his daughter in 2017”.

Let’s be generous: such situations are still technically democratic. But one can’t help but wonder what sort of language might be employed at The Economist were a small-but-rising free-market, pluralist party to be blocked in a such a manner by a determined coalition of nationalists.

The biggest problem facing globalism, however, is neither its hypocrisy nor its will-to-power – these are ordinary human failings common to all ideologies. 

Its biggest problem is much simpler: it's very expensive.

Maintaining the metropole

The world has seen versions of the wealthy, cosmopolitan ideal before. In both Imperial Rome and Achaemenid Persia, for example, societies characterised by extensive trade networks, multicultural metropoli and the rule of law (relative to the times) eventually succumbed to rampant inequality, inter-community strife, and expensive foreign wars in the case of Rome and a death-spiral of economic stagnation and constant tax hikes in the case of Persia.

(Interesting side note: gold’s value reportedly saw a 250% rise between 274 AD and the late fourth century.)

It seems near-axiomatic that, in the absence of the sort of strong GDP growth that characterised the post-World War Two era, the pluralist ideal might begin to show strains along the seams of its own construction. 

Such strains can be inter-ethnic, ideological, religious, or whatever else, but the legitimacy of The Economists’s favoured worldview largely came about due to the wealth and living standards it was seen to provide in the post-WW2 and Cold War era. Now that this is beginning to falter, so too are the politicians and institutions that have long championed it.

In Jakobsen’s view, the rising tide of populist nationalism is in no way the solution, but it is a sign that globalisation’s elites have grown distant from the population as a whole.

“The world has become elitist in every way,” says Saxo Bank’s chief economist. “We as a society have to recognise that productivity comes from raising the average education level… the key thing here is that we need to be more productive. If everyone has a job, there is no need to renegotiate the social contract.”

Munich protest
A standoff between right-wing PEGIDA supporters and left-wing antifa 
protesters is maintained by riot police in Munich. Photo: iStock

Put another way, would the political careers of Trump, Le Pen, Viktor Orban, and other such nationalist leaders be where they are if the post-crisis environment had been one of healthy wage growth, inflation, an increase in "breadwinner" jobs, and GDP expansion?

From ideology to action

Most people do not spend a great deal of time imagining ideal economic and political systems. Most just want to live satisfying lives among their friends and family, and to feel as if their leaders are doing all they can to enable such a situation.

What matters are the data, and if these are not made to become more encouraging, calls for this particular empire’s downfall will come with the same fervour and the same increasing frequency that they have throughout history.

The problem is not that people are choosing the wrong system, it is that they are unhappy enough to want to change course at all.

Unless the developed world can find a way to reform itself out of its present malaise, no amount of media-class vituperation over xenophobia, insularity or “the uneducated” will be sufficient to turn the tide.

Michael McKenna is an editor at
02 August
Paul168 Paul168
Read the Economist editorial earlier today and indeed it seemed strange, even "panicked". Glad to see your comments.
02 August
Michael O'Neill Michael O'Neill
Well done, Michael. President Obama agrees with you as well. He said " the Republican nominee is unfit to be president"
06 August
naigoreip naigoreip
Excellent Michael, the Economist is the living proof that being overly educated can co-exist with an absolute lack of common sense.
07 August
Adam Courtenay Adam Courtenay
I like this idea about the elites and the fact that unless we can haul all up, hauling just the top tier won't cut it. And hence the rise of anti-pluralism in the form of Trump, Le Pen et al. Perhaps more socialist engineering to rebalance fairness will ease this malaise. It's what Roosevelt did. Great think piece, Michael.
07 August
Third Estate Third Estate
Great think piece but, TRUMP RESIST AND WIN!!! LE PEN HOLD ON


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail