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SHAPING THE FUTURE SOCIAL, LIBERAL AND DEMOCRATICCAPITALISM FOR THE 21ST CENTURY

ULF DAHLSTEN

SENIOR ADVISOR GLOBAL UTMANING

MAY 2018

Author: Ulf Dahlsten, senior advisor Global Utmaning

Published May 2018

Coverphoto: Dmitri Popov on Unsplash

Layout: Joel Ahlgren

Design: Stockholm Komm

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ISBN:

SHAPING THE FUTURE – SOCIAL, LIBERAL AND DEMOCRATIC CAPITALISM FOR THE 21ST CENTURY

SHAPING THE FUTURE - SOCIAL, LIBERAL AND DEMOCRATIC CAPITALISM FOR THE 21ST CENTURY

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TABLE OF CONTENTS

Preface 4

1. The Challenge 7

2. Global and European Market Governance 26

3. Reinvented National Ways 34

4. Shaping the Future 40

6. Notes 42

7. Reference List 43


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PREFACE

2017 was a slightly better year than the terrible 2016 for those that believe

in an open society and a global, social and liberal democratic capitalism.

The Right-wing extremists were denied power in the Netherlands, France

and Germany.

But it would be a severe mistake to believe that the challenge offered by

the Populist Right is over or that more of the same now is the answer. The

international elite, from the traditional left to the traditional right, is guilty

of a collective neglect, focusing on the success stories and refusing to see

the many in the Western world who have been negatively affected by the

globalisation, by outsourcing, by information technologies and by robotics.

They have refused to recognize the unsustainable and still growing current

account imbalances between countries with trade surpluses and countries

with deficits, and the effects of those imbalances on jobs and income, and

they have put a blind eye to the excessive growth of a vulnerable global

financial system prone to bubbles, a build-up of private debts and recurring

crises. The latest financial crisis, and the largest, forced nation-states to

take on huge debts to save their banks and consequently we have now

a third and growing systemic crisis, a sovereign debt mountain, not seen

since World War II. The progressive left has also been sleep-walking, focusing

on the fine-tuning of civil rights while inequality has risen to levels

unheard of since the start of industrialisation.

Those outside the establishment increasingly distrust the established

politicians that they find arrogant and, perhaps even worse, clueless.

They are drawn to Right-Wing Populists that at least seem to understand

their situation. The Far Right explore their distrust and despair, challenge

globalisation, which they describe as a liberal elitist project, embrace

politically incorrect sentiments such as bigotry, xenophobia, rejection of

science, patriarchy, religious fundamentalism and nationalism.


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The escalation of migration, partly caused by conflicts following the rise of

fundamentalism and by climate change, is used to stigmatize immigrants

and describe them as the root of all problems, just as Hitler once did with

the Jews.

The historian Arnold Toynbee has studied the collapse of twenty-one

different civilizations and attributed the collapse to two causes. The first

is the inability to introduce significant changes in the face of shifting

circumstances. The second is the excessive concentration of wealth in the

hands of the few. i If Toynbee is right, we are facing a difficult situation.

The responses to the devastating climate change have been weak and the

challenges offered by globalisation ignored. Inequality has also become

quite extreme. Eighty-five individuals own more than 3.5 billion of the

world’s population together. ii

The response to these challenges by the traditional political parties vary.

Some conservative parties have embraced the right-wing populism and

adopted their policies. The Tories of the UK are now anti-immigration and

nationalistic, and their leader mocks the young who think they are citizens

of the world. The US Republicans are warming to the right-wing populist

agenda of their new President. Liberal-minded Americans can now to

their shock tick off all the 14 identifying characteristics of an emerging

fascism, once researched by the political scientist Lawrence Britt. The

support by the financial elite for the new direction has been secured by

promises of light-touch regulation of the financial markets and by further

reduction of the taxes for the richest.

However, most traditional parties outside the US and the UK seem to try

to defend global market liberalism either by denying the down-sides, by

offering unrealistic alternatives or by simply focusing on something else

such as the environmental challenge. They attack the illiberal values of the

populist right, but lack credible alternatives of their own, global and local

narratives that can engage and create hope for the future.

Whether they see themselves as social conservatives, moderates, independents,

liberals, progressives, social democrats or just apolitical they need to join


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forces to enable the development of a new credible global story. They

must be unyielding about saving the planet and address terrorism. It is

imperative but not enough. They must also admit that the global market

economy has outgrown the nation states and need proper regulation to

create benefits to all. There is a need for a global rule of market law and for

credible answers to the build-up of unsustainable trade imbalances as well

as to the unmanageable sovereign debt mountains.

In this booklet, I discuss how a global market governance based on the

rule of law, which can address these challenges, could look like and come

about. A functioning global governance is a precondition for the development

of a democratic capitalism for the 21st century, and a pre-condition for the

EU and nation-states to create smart, sustainable and inclusive growth

and glocal stories of hope and of confidence in our joint ability to shape

the future. Only with proper global governance can we reach the ambitious

goals of Agenda 2030, a sustainable and open global society with togetherness and

equal opportunities, with full employment, good education for everyone,

general healthcare and a reasonable distribution of the fortunes created by

the global division of work and technological progress.

I see hope in the fact that polls show that many in the young and the

ageing generations have a shared feeling of responsibility for the common

future. They bring different perspectives to the cause, the ageing a life-long

experience of how to drive societal changes, the young insights in how to

use modern technology for social entrepreneurship. Mobilized together

the two generations of “Futureshapers” can make a huge difference.

It is also high time to stand up for the Enlightenment values, to fight

prejudice, racism, xenophobia, patriarchism and rejection of science in all

their forms whether preached by the Far Right, commercial media or

religious fundamentalists of all faiths, be they Christian, Jewish or Moslems.

It is a responsibility to be taken seriously by schools, churches, the civil

society, media, political parties, scientific academies and social entrepreneurs.

It has been a historic mistake to be tolerant towards intolerance.

Ulf Dahlsten


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1. THE CHALLENGE

Free trade and mainly unregulated global markets, together with

technology change, have lifted hundreds of millions out of poverty in

China and elsewhere, but many frustrated Westerners, factory workers as

well as office staff, have seen their jobs replaced by robots and computers,

disappear abroad or go to better qualified immigrants. The median

income in most Western economies has not increased for thirty years.

When people have seen how riches have been amassed in the hands of a

few, while the trickle-downs they have been promised by the liberal elite

have failed to materialise, their enthusiasm for Global Market Liberalism

has begun to dwindle. Technological progress, especially the IT revolution,

has brought some compensation for the lack of increases in income, as

have the possibilities to borrow at low interest rates in order to improve

living conditions. But when house prices slumped during the Great

Financial Crisis and asset bubbles burst, many have found themselves with

another broken promise. Not only many of the young and unemployed

but also many in older generations have lost their appetite for the global

liberal market story and its promises altogether. Where are the future and

the secure jobs for the children and their grandchildren, the opportunities

that should be available for all; where is the fairness?

Neither can they mobilize any enthusiasm for the progressive liberal projects

that have dominated the last decades and their emphasis on environmental

protection, increased acceptance of gender and racial equality, social toler-

ance of diverse lifestyles, religions and cultures, international cooperation,

and protection of fundamental freedoms and human rights. Over time

their response to the projects can only be described as a cultural backlash.

Less educated and older citizens, especially white men, who were once

the privileged majority culture in Western societies, resent being told that

traditional values are ‘politically incorrect’ when they have come to feel

marginalized within their own countries.


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Feeling unseen and forgotten many blue-collar workers in Western

countries have turned their back on the Left and now support the Populist

and Nationalistic Right.

Darkness is spreading as Enlightenment values are rejected all over the

Western world and the two major liberal projects of the last decades have

lost their broad appeal.

Weakening Democratic Capitalism

Socially engaged politicians have also felt left out as the marriages

between markets and politics that for decades have been so successful,

whether we call them liberal democracy, democratic capitalism, the Nordic

model, or something else, no longer are marriages between equal partners.

The market economy has outgrown the nation-states and become global,

bereaving politicians of many of their tools. The market economy is a

bottom-up system and, as such, it mainly needs predictable and transparent

rules, not interventions. But it does need the rules; a level playing field is

an essential precondition for effective markets and for the benefits to be

shared by all. That was the lesson learned during the first phase of

industrialisation. In an unchecked capitalist system, many workers are

taken advantage of, while others are left unemployed. A skewed distribution

of income and wealth is likely to develop, monopoly powers to evolve and

lead to abuses, and the environment to be left unprotected. Many of those

patterns returned a hundred years ago during a globalisation period driven

by colonialization and a new phase of industrialisation and we see some of

them once again. Now, as then, national governments have lost control of

the globalisation process, especially of the financial markets. Once again,

the markets have run away from politics, to quote the German philosopher

Jürgen Habermas.

It is not only the upper hand of democracy over capitalism that has been

lost. There is also an indispensable centrepiece that has been weakened,

the rule by and of law. The legal system, with its independent judiciary and

formal institutions, has prevented the abuses that accompany unchecked

capitalism and ensured civil, political and market liberal rights.

The leading powers are sometimes surprisingly fast and decisive, but that


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is basically only when the house is on fire. In general, the present order

is reactive. The political response to the globalization of the markets has

thus so far been weak, mainly consisting of more of global networking

between national leaders in fora such as G20. Even if the public networking

is accompanied by private commercial networks in everything from

shipping to mining, it is a poor replacement for the upper hand that the

public order had as long as the marriages were national. There is:

Lack of authority. Most decisions taken on the international level need to

be implemented at the national level to be enforced and by governments

that, for different reasons, are susceptible to lobbying and “black-mail”

from actors who oppose regulation.

Lack of transparency. The populations in general feel excluded from the

networking and are suspicious of the motives of the participants. Meetings

are surrounded more by rumours than by an enlightened debate.

Lack of accountability. There is no one to blame if we enter into a new

financial crisis. There is no one to hold accountable if climate change

becomes irreversible. There is no one to blame than the insufficient regulated

global economy as such.

Undermined nation-states. The room for manoeuvre by nation-states has

declined. Many Western economies are debt-ridden, have to consolidate

their finances, and are in difficulties as a consequence of the mismanagement

of the financial system. The rulers have increasing difficulties in meeting

their domestic demands, promoting growth, and acting to correct negative

externalities when companies and wealthy citizens threaten to vote with

their feet.

Limited scope. A holistic approach to the world markets is lacking - an

approach that covers trade, global imbalances and financial markets in

an adequate way, but also, for example, entails the right to buy foreign

assets, covers the need for coherent competition rules and an appropriate

protection of IPRs, and which furthermore addresses the joint responsibility for

global climate and environmental issues and regulates the right to exploit

valuable and scarce resources in sensitive areas such as the Arctic.


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The challenge we face is how proper global governance based on the rule

of law can be created and structured and how the power of the global

markets can be both liberated and properly controlled. To build a future

governance structure, which can be pre-emptive, coherent, transparent

and effective, with the present ‘bottom-up’ approach based on networking

has proved to be an awkward, if not impossible task.

The indispensable nation-states

The next challenge is how empowered national, regional and local public

bodies can benefit from global governance and reconstruct their damaged

marriages between democracy and markets. The nation-states are in that

process indispensable. The nation-state iii is the constitutional level and

can set the rules for civil society in accordance with its national culture

and habits. It ensures human and social rights and has a crucial role in the

building of social capital. The nation-states also have an important task

in building the conditions for economic progress. Not only companies

compete; so do nations.

The way people want to live varies with their history and traditions, reli-

gious and other shared values, dreams and expectations, the environmen-

tal conditions and common assets, and with what they may have learned

about other, and perhaps better, ways of living. Although many would

be prepared to argue intellectually in favour of equal and ‘fair’ social

conditions all around the world, there is at the same time a reluctance,

shared by most people, to allow decision-makers who are too far away to

have a final say on issues that concern their own social conditions. The

tendency is, rather, that people want to see such decisions anchored even

more locally; this is driving, for example, the decentralisation in Spain and

the possible ‘break-up’ of Belgium.

But as the power of the nation-states over the market economy has

withered away as the market economy has become global, it has become

more and more difficult for a nation-state to impose rules for the market

economy unilaterally. This is true even if the nation-state is member of

The European Union. Even the EU’s and the states’ role as implementer

of globally agreed standards and regulations is under pressure. Regulatory


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capture is far too common. The undue influence that market actors can

exercise on political decisions is often subtle and hidden from the public

gaze. But there are also those who don’t hesitate to show the power that

the unchecked globalisation process has given them.

The nation-states have not only lost power. A severe problem for the

Western hemisphere is that the financial status of the nation-states has

deteriorated at the same time as they are facing the negative consequences of

digitisation and globalisation on employment, the challenges of an ageing

population, and the aftermath of the financial crisis. They have, in many

cases, been forced to socialise debts originating from banks and households, and

they are in addition often burdened by old debts, sometimes due to mis-

management. Governments have also found it increasingly difficult to tax

their global companies and rich citizens, who with the help of deregulated

financial markets have no difficulties in voting with their feet and moving

their profits and wealth out of the governments’ reach. Many countries are,

in practice, restricted to a redistribution of income and wealth between the

more well-off ‘ordinary’ citizens and the less well-off. All this is damaging

their abilities to finance the social programmes asked for by their citizens

and the necessary investments in the transformation of their energy and

communications system to become more sustainable.

Unresolved global challenges

What makes the global situation especially precarious is the ecological

crisis we are facing. The planet is in peril and if actions to halt a devastating

climate change are delayed we may all face a very bleak future. The call for

responsible actions to save the planet for our children is compelling but

has been met with denial by the right-wing populists and many of those

who feel that their own future is in peril.

There is also an explosive social crisis that needs a conscientious response.

Climate change and religious conflicts have made millions in Africa and

the Middle East leave their homes in search of livelihood and a future,

thrusting the belief of the liberal elite in open borders against the perception

of many that immigrants take their jobs.


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The possibilities for networking nation-states to offer stable conditions

and address global problems are also getting weaker as the globalisation

process proceeds. Institutions and the political will to address mounting

global problems are lacking. One serious economic problem, often

highlighted by the Right-Wing Populists, is the trade imbalances that

show up in increasing current account deficits in the US and Southern

Europe and huge surpluses in especially China and Germany. The famous

economist JM Keynes once said that such inequities if not corrected are

the source of wars. That the US under President Trump is withdrawing

from its global leadership does not simplify the situation.

A lack of effective demand from the real economy, from public and

private investments and from the Ninety Percent, has forced central bankers

to lower the short-term interest rates into negative territory in order to

create inflation and make the banks lend more. They have succeeded,

there is growth as the banks have responded, but not only by lending to

consumption and real investments, but mainly by lending to the purchases

of existing assets in real estate. The result as households are borrowing

both for consumption and for buying houses are spiralling private debts

and a dangerously over-extended and vulnerable global financial system,

both factors that will ultimately create new financial crises. If they can be

contained locally or lead to a new global crisis is an open question.

The financial market actors are often hailed for their innovativeness, and

frequently express pride over their international reach, new products and

technological advancements, which have stimulated the growth of the

financial system; but, as the recent history has told us, it is not a

development without risks. The actors respond to perceptions, expectations

and fears, and when the herd moves, so do they.

The knowledge among investors both about the foreign markets in which

they enter and the new creative products they are offered is not always

as deep as one would wish. The technology is pushing the decision-time

to a minimum; yes, even to the point in which machines take over the

trading. Consequently, the risks for faulty decisions based on perceptions

and group conformity have increased. The fact that five years of on-going

financial crisis was not ‘sufficient’ to substantially change the picture and


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align the financial and the real sphere again is telling about the magnitude

of the problem.

It is imperative to steer away from the dependence on the financial system

for growth and create an effective demand in Western economies, both

in the form of consumption and investments, that can drive sustainable

and inclusive growth. Real investments in relation to GDP have fallen for

several reasons. Countries, laden as they are with debts after having to

save their banks and in some cases irresponsible tax cuts, have been forced

to delay infrastructure investments; the service economy demands less

investments and investments in industrial capacity have often taken place

in emerging economies in which the costs for the investments are lower.

The increased inequality in Western economies has at the same time led to

relatively more savings as earners with higher income save more and con-

sume relatively less. The amassing of riches through an unregulated finan-

cial system and lower taxes for the richest have not led to the expected

private investments that could ‘trickle down’ to the Ninety Percent and

create growth and jobs. The IMF researchers Jonathan Ostry and Andrew

Berg have on the contrary shown that responsible redistribution would

have been more likely to create growth. iv

Citizens in emerging economies that have been lifted out of poverty also

save more, something most of them must do as there is a lack of public

pension systems. The result is not only a low effective demand but also a

savings glut, in which savings surpass real investments on a global level.

Real interest rates, i.e. the difference between long term interest rates set

by the markets and inflation, have consequently steadily decreased during

the last twenty-five years and are likely to remain low during the

foreseeable future.

The list of unresolved problems does not end here. Many workers in de-

veloping countries are for example exploited and their working conditions

deplorable. The rich and powerful are on the other hand benefitting from

the lack of financial regulations and are using regulatory arbitrage to avoid

paying taxes for services they themselves enjoy.


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The European challenge

The European Union is a wonderful creation that has brought peace to a

continent, which has been war-ridden for centuries. The single market

invention has also increased competitiveness and brought prosperity to

new members. The problem is that it is only a half-way built house and

that it lacks the institutions and democratic procedures with accountable

leaders who can complete the building.

A major triumph for the Extreme Right is that their scapegoating of im-

migrants has succeeded and that they have been able to put immigration

on the top of the European political agenda. Those who have dealt with

immigration issues and not only talked about them often find themselves

surrounded my misperceptions both to right and to the left. The Populist

Right does not recognize that the overwhelming majority of the immi-

grants have come to create a new future for their families, to find work to

support themselves and not to enjoy benefits. The Liberal Left on the other

hand often talk about multiculturalism as if living in a parallel society is

what immigrants want. A few do, but, although they are Muslim, come

from Syria or somewhere else. most dream about becoming part of the

“us” of their new home country and to proudly wave its flag at the football

matches.

The rise of a Dark Age

The growing distrust in the established order and the liberal projects has

been exploited by religious fundamentalists and right-wing, nationalistic populists.

The US is not the only country in which the belief in the stablished order

is lost and in which a right-wing populist has captured the frustration

of globalisation’s losers or succeeded in building a political movement

around their anger and hatred. Right-wing extremists have already taken

over in Hungary and Poland and were close to win the presidential election

in Austria. Boris Johnson tapped successfully into the same feelings of

frustration in his Brexit campaign. What makes the US somewhat special is

that a populist managed to high-jack the governing party.

Inspired by Brexit and the US elections right-wing extremists in Europe

have joined forces and coordinated their messages. A Right-Wing

extremist was close to become the President of France, but the French so-


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ciety proved to be more resilient. It is after all the home of Enlightenment

and of a Revolution that created Modernity.

The progress of the extreme right does not stop there. In Germany and

the Nordic countries anti-immigration parties have now the support of

a quarter of the populations and are in several countries represented in

government.

The common denominator is a rejection of the global market economy and

of immigration from Muslim countries. The Right-Wing populists may call

themselves conservatives but they are something different altogether. Their

embracement of patriarchism, their denial of science, their racist views and

bigotry are outside the scope of traditional value conservatism. You have to

go back to the Dark Ages, pre-Enlightenment times, to find the source of

those values and they have had no place in a Western society of Modernity

since the failed period of fascism three quarters of a century ago.

The political scientist Dr Lawrence Britt wrote in 2003 an article about

fascism that has been increasingly quotedv. Studying the fascist regimes of

Hitler (Germany), Mussolini (Italy), Franco (Spain), Suharto (Indonesia),

and Pinochet (Chile), he found they all had 14 elements in common. He

calls these the identifying characteristics of fascism.

The scary observation is that all 14 elements now are present in the US:

Powerful and continuing nationalism, disdain for the recognition of human

rights, identification of enemies and scapegoats as a unifying cause, supremacy

of the military, rampant sexism. attempts to control mass media, obsession

with national security, religious fanatics and government intertwined, corporate

power protected, labour power suppressed, disdain for intellectuals, obsession

with crime and punishment, rampant cronyism and corruption and, finally,

manipulated and fraudulent elections.

The inaugural speech of Donald Trump had the same rhetoric as Adolf

Hitler’s when he became Reichskanzler. Deutschland über Alles has

become America First, Deutschland was to become Gross. Now it is Amer-

ica that shall be Great again. When Adolf Hitler became Reichskanzler he


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had only gathered one third of the votes. Trump, in contrast, assembled

a majority support, although calculated in a special way. And this in the

country that has been the bulwark of Modernity.

So how grave is the threat to liberal democracy? It is hard to say, but it

would be a mistake not to take it seriously. The amassing of wealth by

some few has created billionaires with political ambitions. The role of the

owner of Fox News, Rupert Murdoch, should for example not be under-

estimated. There has always been the suspicion that his commitment to

democracy and liberal values has been weak. The position of the Koch

Brothers, who are behind the Tea Party, in relation to democracy is also

unclear. And so is, sadly enough, the position of the Supreme Court. With

its approval of money to corrupt the US elections and with its new mem-

ber it is under the spell of the Republican Party. The US is in trouble. As

are Hungary and Poland and in the long run the UK, where Murdoch also

is powerful. He saw the possibility to free the UK from the EU regulations

on human rights and to be able to follow the US lead more closely as two

key reasons to promote Brexit.

Patriarchism is embraced by religious fundamentalists of all faiths, of

Evangelical Christians, of Wahhabi Islamists and of Orthodox Jews. In

the strict father family, father knows best, the life scientist George Lakoff

explains. Father knows right from wrong and has the ultimate authority

to make sure his children and his spouse do what he says, which is taken

to be what is right. The basic idea is that authority is justified by morality,

and that, in a well-ordered world, there should be (and traditionally has

been) a moral hierarchy in which those who have traditionally dominated

should dominate. The hierarchy is: God above Man, Man above Nature,

The Disciplined (Strong) above the Undisciplined (Weak), The Rich above

the Poor, Employers above Employees, Men above Women, Adults above

Children, Western culture above other cultures, Our Country above other

countries. The hierarchy extends to: Whites above Non-Whites, Christians

above Non-Christians, Straights above Gays. vi

On his very first day in office the US President, surrounded by six men,

took away the practical right of many women to protect themselves


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against unwanted pregnancies and a week later he nominated a new

judge to the Supreme Court with the ultimate goal to reverse the Court’s

decision on abortion. The rights of HBTQs also disappeared from the

White House web, signalling that more is to come. The US population has

responded and for the first time since the polls started the tolerance to-

wards HBTQs has declined. Vladimir Putin of Russia followed a week later

by allowing men to freely abuse their women without having to face any

consequences. Erdogan of Turkey is openly forcing women to start hiding

themselves and the bruises they have received from abuse.

For us who are raised in an age of Modernity in which the place of science,

rationality and the search for truth is taken for granted the most shocking is

perhaps that those values have been rejected by so many US citizens. The

US President and his key appointees that now are approved by the Senate

refute the scientific findings around climate change. The President calls

his own lies “alternative facts” and has no ambition to be consistent and

evidence-based in his decision-making. His Vice President is a religious

fundamentalist and creationist; he claims that if there is a conflict between

research and the Bible, the Bible is to be followed. Researchers may claim

that it took billions of years to create the universe, but as the Bible says

that it took eight days that is the alternative fact you should believe in, he

argues.

The man with a heart-beat from the Oval Office echoes the preaching of

the Catholic Church during the Dark Ages. Science is heresy.

The lack of respect for science and evidence did not start with the populist

Right. It sneaked into established policies when it suited the financial elite.

Market liberalism took off with a theory that has proved to be wrong – the

Trickle-Down Theory. Researchers have namely found that the market liberal

theory missed a prerequisite. There will be no investments if there is no public

demand. A stubborn Right is still sticking to the faulty theory and so is the billionaire

Trump who will benefit personally from lowered taxes on the richest.

Researchers have likewise shown that financial markets need to be

regulated. But as the financial elite is winning on unregulated financial

markets they negate the findings. When bubbles are build up the elite

gains and when the system collapses the taxpayers have to bail the bankers out.


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Furthermore, the right-wing populists reject Internationalism and embrace

Nationalism, and so does more and more of the traditional politicians.

Although a recent survey show that half of the populations in 18 Western

countries see themselves as citizens of the world, they are now mocked by

the new Prime Minister of the UK, Theresa May, who famously comments

“If you believe you are a citizen of the world, you are a citizen of nowhere.

You don’t understand what citizenship means”. With the rejection of

internationalism also follows a rejection of the global market economy,

which according to the populists have created the factory closures and the

unemployment in the West.

In the wake of the recent global financial crisis and the economic

consequences the need to find scapegoats has surfaced. It did not start with

the right-wing populists. The established parties have also been quick to

deflect the blame for the hardship following the Great Financial Crisis

(GFC) from faulty theories and the financial elite, focusing instead on the

Chavs, i.e. the “non-apirational” working class, and on the “lazy” Greeks.

The right-wing populists have just added another more disturbing and

explosive dimension when they scapegoat refugees and other immigrants.

Prejudices in all their forms must be contested. But so, has the ultimate

reason for the scapegoating. The social and economic conditions must be

revised, be perceived as fair and benefit all.

The moment of truth for the Right-wing populists is when they get into

power. Adolf Hitler that took over a run-down economy organised the

country as an army with hierarchies and clear roles. He took 20 % of the

income of those in work to improve the infrastructures and finance jobs

for the unemployed and compensated those abstaining from income with

social recognition, titles and orders.

President Trump, on the other hand, took over an economy in growth,

but rightly so, argues that more is needed to create jobs for those affect-

ed negatively by globalisation and digitisation. There is an infrastructure

deficit and he is right in highlighting it. He has also got it right when he


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wants to take away deductions for interest rates. But the rest of

the economic policy he has announced is a recipe for disaster and his-

tory should have informed him. Tariffs on import were introduced by the

US in 1930, created retaliations, a two-third drop in international trade,

deepened the recession and paved the way for Hitler and a Second World

War. Trump’s followers believe that he knows that and just want to bully

other countries to give him something. History will tell. His plans to allow

the banks to increase lending in an unregulated way are more concrete

and will if accepted build up private debt and with, close to certainty, lead

to a new financial crisis. His reduction of the taxes for the richest under-

mine a weak public budget and will have no long-term positive effects on

the US economy.

The end of Pax Americana

The US has for quite a while been the dominating military power. Europe has

had no ambition to compete. Trying to recover after two devastating world wars

Europeans were happy to see the Americans offer a safety umbrella against a

possible aggression from the Soviet Union. The military alliance NATO became

the legal basis for the safety guarantee that still is in place, but it has been a one-way

relationship. Europe has had little more than loyalty in global affairs to offer the

US as thanks. That is also why it is high time for Europe to take responsibility for

its own defence. With President Trump in the White House it is obvious that

Europe needs more independence. President Trump is repeating his message.

The US has for too long taken a benevolent view of the world, putting the

interest of others in the forefront, the saying goes.

Rupert Murdoch, who is Australian and with whom President Trump has

close personal relations, has made no secret of his dream. Since child-

hood he has strived for an Anglo-Saxon world order, not a Pax Americana

in which the US shares its powers with other countries, but World

Dominance. Australia and New Zealand have become part of an intelligence

sharing agreement “Five Eyes” also including the US, the UK and Canada.

It is more than a symbolic entente, as it defines the Anglo-Saxon world

dominance the Murdoch way. After leaving the EU the UK has no alter-

native to playing along. Russia is also left with no other alternative than

to accept the US dominance. The economy is in shatters following the EU

sanctions and the Trump Presidency offers their only way out. Murdoch


20

has never been closer to see his dream come true than now, but maybe

never further away, all depending upon the reaction of the Rest of The

World.

When Europeans feel that the US has gone wrong it seems almost always

been related to an American perception that “The enemy of your enemy

is your friend”. European diplomats see this as an American naivety,

perhaps linked to the spoil system through which decision-makers often

are replaced just when they start to gain experience. The American “friend”

has namely often turned out to be another enemy, sometimes worse than

the first one.

Western security is now under threat from some of those ‘friends’. The

Osama bin Laden story is well-researched. CIA identified him and his

allies in the Taliban movement as enemies of the Soviet Union when the

Russians occupied Afghanistan and given the perception that ‘our enemy’s

enemy is our friend’ they regarded them as friends. When the Soviet Union

gave up and left Afghanistan CIA turned without reflecting down the

offer to continue the cooperation and a frustrated bin Laden transformed

from friend to enemy. It was an easy step for him as his religious beliefs

included a negation of Western values. Al Qaeda was born and the rest is

history. The Daesh is conceived in a similar way. For decades, the US has

seen Saudi Arabia not only as an oil supplier but also as a friend. They

shared the US disdain for the Shiite regime in Iran. This has proven to

be a disastrous mistake. It is true that there always has been an animosity

between Sunnis and Shiites, as between Catholics and Protestants, and

just as in the West the tensions have sometimes led to violent clashes. But

overall, they have been manageable and Sunnis and Shiites have lived

peacefully together in many Arab countries. The Saudi Arabian “friend”

made Shiites into enemies of the US, while at the same time secretly

funding madrasas and mullahs with the purpose to create a Sunni-con-

trolled Islamic Caliphate. There is no way out now. The deadly enemy

Daesh that the Saudi Arabians have created must be outrooted militarily.

That it is up to an unpredictable and impulsive President Trump to manage

this severe conflict is scaring a whole world, but not his followers in the

US. They have been manipulated and kept in ignorance by the Murdoch

flagship Fox News for decades.


21

No shared narrative

There is a lack of a shared narrative of a global inclusive future that can

inspire in this time of distress. A narrative demand both a story line and a

medium and in this information-age there is no scarcity of the latter. What

is lacking is the Story of the future that is credible and to which also those

that fear the future and feel unseen can relate.

As recently as the 1990s there was a natural tendency among the young

in the US to believe deeply “in the American model of democratic

capitalism, which created all men equal but allowed some to rise above

others through competition” vii. But this belief has been replaced by cyni-

cism and a sceptical attitude towards idealism and political initiatives. The

Americans need a new narrative, an alternative to the divisive preaching

of the Populist Right. They have, for a century, been told that the US is the

exceptional country, where everyone can live his or her dream. But the

middle-class has been cheated of that dream as the richest have captured

all the benefits of globalisation leaving them with high mortgages and a

stagnating income. Most people know that something is wrong, that the

American dream is built upon borrowed time and borrowed money. They

need a new narrative that builds hope for the future.

Nor have today’s young Europeans bought into the global story. Many,

especially in Southern Europe, are beginning to express the same de-

spair in the face of unemployment and the same loss of hope, as the

populations in continental Europe at the time of the Great Depression.

And on top of that: since the prime ministers put in charge of the austerity

measures in the Southern European countries are perceived as instru-

ments of the Berlin and Brussels elite the anger is directed towards the

European Project itself.

It is not only Western countries that need a new narrative. A fast-growing

China is in search of an alternative to the confused consumerism that has

spread like a wildfire and invited both over-reliance in eternal growth and

a devastating stock market crash. The new Chinese

President, Xi Jinping, has captured the longing for a new narrative in the

concept of ‘The Chinese Dream’, a slogan that now is copied regionally

and locally.


22

A well-meaning international elite is producing one declaration after the

other on human rights, on social rights, on women’s right, on the rights of

minorities and other rights, but as there often is little connection between

the goals and actions on the ground they lack credibility and are just like

other declarations forgotten even by most signatories when they come

home. There is no shortage of stories with a small s that give feeble

guidance and minute hope.

Researchers who have studied the roles of narratives have an answer. To

catch and engage, a narrative about the future must have a story line that

is credible, positive and open-ended. A story with a pre-set ending,

especially if it is disappointing, does not inspire re-telling.

Clueless political elite

It may seem as a brutal verdict, but both the Mainstream Right and the

Mainstream Left need to rid themselves of old ideological garbage if they

are going to make themselves relevant and prevent populist right-wing

extremists that reject Enlightenment values to take over everywhere.

The problem is that the somewhat systemic crisis in which we find our-

selves has many dimensions. There are economic, social, cultural and

ecological factors. Some challenges are shared by all of us, Western as

well as emerging and developing countries; some are regional and some

national or local. Some aspects are strongly intertwined with other com-

ponents, some are isolated. It is a well-known fact that we often find it

difficult to address such multifaceted and complex challenges collectively

and that we tend to look for simple answers. In the present crisis, we have

seen many such understandable attempts from the traditional parties. It

is all about the hyper globalisation, some claim, and if you believe that

simplified explanation then the straightforward answer is to raise borders

again and block trade and cross-border finance. It is all about political

overreach, others claim, and the answer is to deregulate and privatise more

and let the markets run their course. Or it is all about a global financial

elite who decide in secret meetings how to exploit the rest of us, and the

answer is then that we need a global democracy that can match the power

of those greedy capitalists. Or it is the economic system that is driving us


23

towards an unsustainable lifestyle that risks making our planet inhabitable

for future generations, and the answer, if that were to be the right analysis,

becomes that we radically must change our way of life.

Not only do we look for simple answers, we also have blind spots. It is part

of being human. We often just do not want to recognise that there can be a

link between decisions taken on faulty premises and current predicaments,

especially not if we are guilty of having promoted the wrongful actions.

It was thus perhaps to be expected that many economists have found it

hard to acknowledge that it was a mistake to liberalise the global financial

markets without proper oversight and regulations in place. Neither should

it be surprising that many Western politicians have a hard time admitting

that they should not have run their budgets with deficits in good years,

reduced the taxes, lowered the pension ages or shortened the

working-hours. We all have our blind spots. It is our self-justification processes

that are at work.

Understandably, the traditional parties are perceived as clueless by those

that vote for the populists. The unseen may not believe in everything the

populists say, but the Far Right at least seem to understand their despair.

Their distrust in the political elite is comprehensible. There is no realism in

the projects of the idealistic left, global democracy or de-globalization, and

the pragmatic left has so far only prescribed more of the same, something that

obviously does not work. A stubborn Right is likewise stuck in a neoliberalism

that has gone too far and no longer delivers. Neither the Left or the Right

have fully understood the effects of technology and severely underestimate

the second wave to come with Robotics and Artificial Intelligence.

The way to counter the rise of Right-Wing Populism and the distrust in

liberal policies can thus only partly be through an elaborated rhetoric.

What above all is needed are new approaches and new policies that in a

credible way address the concerns of those that feel left behind, who have

lost their jobs when they have been moved to emerging countries or taken

over by computers, robots or more qualified immigrants, and who see a

globalisation that makes the rich richer but does not create the new jobs

they and their sons and daughters are looking for.


24

The lesson for Futureshapers of all political colours is to stop supporting an unregu-

lated global market economy with flawed competition and unfair labour conditions

and to realize that globalisation demands new inclusive and sustainable social and

economic policies that save the planet and create benefits for all.

To defeat the Right-wing populism and address the global challenges, politics

must be renewed and a new narrative developed. Ways must be found to replace the

failed democratic capitalism of the former century by a Democratic Capitalism for the 21st

Century, which recreate the sovereignty of nation-states to decide upon the social and

cultural conditions under which their citizens want to live, while recognizing that the

market economy has become global and needs to be regulated. The solution should be

based on evidence and inspired by scientific analysis to avoid a repetition of old mis-

takes. The renewal of democratic capitalism is a new necessary liberal project that should

be embraced by all that believe in democracy, human rights, the rule of law and other

Enlightenment values from the pragmatic Left to social Conservatives.

It is a cornerstone of a Global story of a fairer and more inclusive future, a story

about opportunities for all, of technology and the financial markets in the service

of the people, of togetherness instead of loneliness. There is no reason to give up.

A Global Story can be created, be shared with those in the Western world who

wish to herald change as well as with those who have become cynical and lost hope,

a credible, positive and open-ended story – or more correctly – there are Glocal sto-

ries to be told, stories that combine a global vision with a local narrative anchored

in the reality people recognise. And while there are many common concerns, the

situation for a young Greek from Athens is very different from that of a young

Chinese from Shanghai. A local new narrative, a narrative for our time, will thus

have many versions. The global part of the narrative will strive to identify common

ground on how to address challenges that no one can tackle on their own. The lo-

cal part of the narrative, on the other hand, must be built on the social and cultural

conditions in each and every one of all the local communities; the glocal stories

will have different scripts in New York and Paris, in New Delhi and Beijing.


25

2. GLOBAL AND EUROPEAN MARKET GOVERNANCE

To restore the full power of democratic capitalism we need to address the

global challenges and create a credible governance of the global market

economy. In that endeavour, we should learn from contemporary resear-

ch. Life sciences tell us that we humans are multifaceted and that a lot of

our decision-making is done subconsciously and in another way than our

conscious reasoning. To navigate in a complex world, we need stereotyping,

which limits our ability to bond and bridge with other people. We have

global markets and a global society, but life sciences tell us that a global community,

which is a precondition for global democracy, is unlikely to develop. Life

sciences show why we want social and cultural conditions to be decided by

people with which we can bond and bridge.

There is evidence that we accept a global market economy and to be treated

as means on the market, if it ensures that our desires are met to a greater

extent, but only if we are shown sufficient respect and receive sufficient

recognition.

The Global Story has to recognize those preconditions and that the global

market economy every year lifts tens of millions out of poverty, but also

leave many behind; it has to recognize the peril in which our planet finds it-

self, the unsustainability of the current account imbalances, the vulnerability

of the global financial system, the dangerous build-up of debts, the unhealt-

hy cartels and exploitation of workers, the need for the rich to contribute

to the public services they enjoy themselves and the lack of a level playing

field.

Make the Eurozone sustainable.

European integration policies can be improved, and the immigration be

matched better with the lack of skilled workers caused by demographics. But

more important is to address the unresolved problems that have created the

need for scapegoating in the first place.


26

The largest challenge is thus the current account disequilibrium within the

Eurozone that no longer can be ignored. Imbalances, especially between

Germany and the GIIPS countries (i.e. Greece, Ireland, Italy, Portugal and

Spain), have grown continuously since the introduction of the Euro in 1999,

contrary to the founders’ expectations. There is a need to continuously adjust

the level of the surpluses and the deficits through internal devaluations/

revaluations or through inflation, but that is easier said than done in a

zero-inflation environment and with negative interest rates. Economists

have since the start claimed that a currency union cannot work without a

fiscal union. If the Euro is to be saved Germany with an undervalued cur-

rency must agree to make transfers to those loosing on the exchange rate,

mainly the GIIPS countries. They have in their turn to accept fiscal discipli-

ne. There is no way around this inconvenient deal and it must be combined

with economic policies that addresses inequality and the mass unemploy-

ment among the youth in Southern Europe.

Corruption is also a huge challenge, and the fact that half of the EU Member

States have corruption issues cannot be described as anything other than a

gigantic failure. Without trust and a healthy social capital there is little hope

for Europe in the long-term. Perhaps the most realistic approach is to start

addressing the corruption problem when the Eurozone becomes integrated,

and as a pre-condition for more nations to join.

Address the unsustainable imbalances.

President Trump plans to introduce import tariffs to address the untenable

US trade deficit and create jobs in the US, at least it is what he threatens

to do. His main obstacle is the overvalued US dollar. As the high valuation

is more due to the role of the dollar as the world’s only reserve currency

than the strength of the US economy there is another way out. That is to

expand the role of the IMF Special Drawing Rights, which are based on all

the leading currencies. Several present and former central bankers such as

Governor Zhou from People’s Bank of China, the former General Manager

of the State Bank of India R Rajan and the former President of the European

Central Bank J-C Trichet have made proposals on how to use the SDRs to

relieve the dollar of some of its burden as a reserve currency.


27

If such steps would not lead to the desired recalibration of exchange

rates there is another more radical way out and that is to reinstate a system

with fixed exchange rates that enables an alternative way to address

the imbalances, namely through a controlled adjustment of the exchange

rates. The US was once party to the demise of such a system, called Bret-

ton Woods, but that was when it had a trade surplus. It will not be easy to

convince the major surplus countries of today, China above all, about the

merits of fixed and adjustable exchange rates. A deal is unlikely if it is not

combined with other actions that show the US commitment to the global

market economy. A new Bretton Woods also needs to be accompanied by

a completion of the Eurozone. The imbalances between the North and the

South of Europe cannot be corrected via exchange rate changes as they have

the same currency. What is needed is a fiscal union with transfers.

Restructure public debt.

The public debts, which countries took on during the last financial crisis and

by mismanaging their budgets, have continued to grow and the forecasts are

troublesome. With average debt levels that are approaching the global

GDP the problem requires urgent attention. We no longer need case by

case solutions but a global approach. One reason is that it is more and more

obvious that an increasing number of countries are, or will be, unable to

repay their debts. A second is that the high debt levels and the costs of ma-

intaining them are severely hampering economic recovery and growth built

upon an effective demand not fuelled by debt, with global consequences.

What is needed is a “Super Paris”,viii a settlement in which all countries that

want to participate agree to restructure their debts in an accepted way. It

would be a daring step and take a lot of courage and leadership.

But it is possible. Central bankers have entered into unprecedented

practices. One of them is the Quantative Easing. When this is written, cen-

tral banks have become the owners of more than 25 trillion dollars of state

debts. That is a huge intervention in the markets that has substantially

increased the supply of money. To write off those debts would be a much

smaller step. And it would not be the first time that a country that is not

bankrupt take this type of action. Nixon did something along those lines to

write off the debt incurred by the Vietnam War.


28

International Market Law.

In the marriages of the last century between the public orders and the

markets the upper hand lay, at least in principle, with the public order.

Nation-states and, in the case of Europe the EU, could steer the markets in

general towards fair competition, respect for externalities and acceptable

labour conditions, and the financial markets in particular. That upper hand is

mostly lost as the market economy has become global.

What now is needed is the minimum of International Market Law that

can re-establish balanced marriages on national levels and restore the

nation-states sovereignty over social and cultural conditions. There are four

areas of legislation that need to become international.

Financial regulations. Few know that it is the banks that create almost all

money. It is a societal function and as such it ought to meet societal goals. It

does not. The banks support to the real economy is a mostly neglected side

business. The vast amount of money banks create are for financial specula-

tions, which makes the financial markets inherently unstable.

History tells us that new crises can come from the most unexpected corners.

The Basel Committee for Bank Supervision (BCBS) has identified excessive

financial liberalisation as the most common cause, followed by, and in paral-

lel with, asset bubbles, real economy problems and poor regulation. Impor-

tant steps have been taken to improve the resilience of the bank system, but

the new regulations have not been able to prevent the continuing excessive

money creation for the wrong purposes and the build-up of private debt.

Those are major interlinked problems that need to be addressed.

One main unknown factor is the size of the risks the banks are exposed

to, directly and indirectly, through the shadow banking system, and these

murky risks are not yet under control. As this is written it is the real estate

bubbles brewing in some countries and the growth of the bond market

in emerging markets, which create worries. There is, according to Merrill

Lynch, close to 2 trillion dollars of bonds outstanding, many of which are

junk bonds in e.g. steel factories in Russia and real estate development in

China.


29

This indicates that the size of the questionable assets in the financial system

is in the same ballpark as before the latest great crisis. That is disturbing.

The worst-case scenario is a new financial meltdown, a more or less certain

scenario if President Trump get his proposals through Congress. The effects

of such a crisis could be disastrous. Many countries have already taken on

more debt than they can serve and they cannot afford to save their banks

a second time. The states in the Western hemisphere have, on average, not

been as debt-laden in relation to the GDP as they currently are since the

end of World War II.

BSBC is continuously working on recommendations on how to improve

the resilience of the financial system and new ones are under way. They are

unlikely to be accepted by the present US Administration, but that does not

make them less urgent. The Rest of The World (ROW) under the leadership

of the EU and China should agree on a common regulation of the financial

markets and force international banks active in the US to ringfence their

activities.

If nothing of this is achieved countries should reconsider the radical

proposal embraced by many economists, namely to remove the privilege of

banks to create money.

Domiciliation of income. The bad state of the public finances in many Western

countries is not only due to the servicing of debts caused by the rescuing of

banks during the latest crisis or to reckless tax reductions. Many

nation-states have been running their budgets with deficits for quite a

while, even in the good days of the 1990s, as they have experienced difficul-

ties in responding to the demands of their citizens, facing an ageing popu-

lation without a balancing increase in tax revenues. This is a huge challenge

for the future too. It has not helped that global companies and wealthy

citizens use regulatory arbitrage in order to avoid taxes. Countries are, with

the help of the OECD, increasingly trying to fight both the illegal tax evasion

and lawful tax avoidance that undermine the public finances, but there are

limits to what they can achieve in the absence of international legislation.

We do not need tax harmonisation, but we do need international laws that

clarify that people and companies should pay taxes where they make their


30

income and have their activities. It goes without saying that it is imperative,

if countries are to regain the ability to balance their budgets and use them

actively in support of growth, that the richest people and the global

companies also pay taxes.

Competition law. There is a soft international contract law. i.e. cross

border contracts often include a reference to arbitration by accepted fora.

But competition laws differ from country to country and the jurisdiction that

the US and the EU have claimed is contested. In practice, many internatio-

nal markets, not at least commodity markets, are controlled by cartels since

there is no international competition law with a bite. The global market

economy could produce more for less with proper competition oversight in

place, which addresses abuses by transnational companies. Likewise, there

are agreements on intellectual property rights, but they are not implemented

in a coherent way. International competition law could protect those rights

and create a level playing field.

Environmental law. And last, but no less important – there are global

environmental problems that only can be addressed efficiently and fairly

if the same rules are applied to everyone. Climate Change is a global issue

and companies should not be tempted to duck that responsibility by moving

factories to countries that do not respect the environment. Such invitations

to regulatory arbitrage could well be punished with tariffs on their exported

products. The Paris Agreement on climate change should thus be followed

up by an international law on corporate responsibility.

Global Deal.

Unchecked capitalism leads to exploitation of workers. This was true when

industrial capitalism first developed and it is true now. There must be a

balance between the interest of investors and employers and the interest of

workers. That balance is now tilted in two ways.

In developed countries, migrant workers are given lower wages and less

acceptable labour conditions than the unionized domestic workers. This is

one of the major concerns that drove many British workers to vote for Brexit

and had a significant impact on the outcome of the US election.


31

In developing countries, international companies are often exploiting

workers, forcing them to accept wages under the UN poverty level as well

as unbearable working hours making the threat to move to an even poorer

country should they refuse.

At the UN General Assembly 2016 a number of countries from all conti-

nents and under the leadership of the Swedish Prime Minister Stefan Löfvén

launched the idea of a social dialogue between the transnational companies

and unions representing the workers with the objective to address the two

problems. The aim is not to support protectionism through the back-door, as

all participating countries believe in the benefits of free trade, but to create

acceptable conditions for all.

A Global Deal will not solve domestic labour market issues. Many European

countries need to address structural flaws in their labour markets by introducing

‘flexicurity’, increase the participation of women in the workforce and adapt

pension ages to the increased longevity, mainly by rising retirement ages

and adjusting pensions, to give a few examples. But a Global Deal will make

this task easier.

Implementation.

It is within the remit of the IMF to address the current account imbalances.

It is just, if that is the right word, a question of political will. Countries can

also meet in a “Super-Paris” to restructure public debt and A Global Deal

can be made between organisations representing transnational companies

and unions. But the development of international market law demands a

Legislator. There is already an Assembly fit for the purpose, the Assembly of

the IMF. To increase transparency, it could be complemented with a Council

with seasoned experts and representatives for the civil society. The popular

participation in the decision-making is also crucial and must be ensured

through open and transparent processes and a Public Information Space

with media that in competition fill the role of non-partisan and objective

spectators.

There is also a need to nominate prosecutors and create an International

Market Court. But all the preparatory work and the practical implementation


32

can be entrusted existing international organisations.

Already existing UN organisations and charities can also be used in a more

efficient way in order to reach the new goals for the developing world, Agenda

2030.

Wise Men and Women. One step in the process towards a deal on improved

global market conditions could be for political leaders to identify some

form of group of Wise Men and Women representing key countries and key

interests and give them the task of proposing such actions that does not

demand new or developed institutions as well as a World Market Charter

that defines the objective and e scope of international market legislation.

The legislative process must be open and inviting, the purpose of legislation

be value-based and well-defined, and the Charter as clear about what the

international legislation can cover as what it should not. The Charter must

also define how the legislation is decided and how it is enforced; in short,

how the Rule by and of Law should be organised.

There are many obstacles to overcome, the largest being to get the US

Administration and Congress to accept a deal. We may end up with the

unthinkable; a rule-based global order without the US as one of the

signatories.

With proper global conditions, Western nation-states can regain

the sovereignty to form their own futures. A financial system that better

supports the real economy combined with a debt restructuring will have a

healthy effect on growth and employment. Growth will, together with better

taxation conditions, strengthen the public finances and the possibilities of reducing

debt and tackling the problem of the ageing population. The increased in-

come inequality would be halted as the casino economy is kept under wraps

and taxation control is expanded to include the richest. International en-

vironmental laws would stimulate the transition towards a greener economy

and help to halt climate change.

A Global Story with Democratic Capitalism for the Twenty-first Century will

of course not be a miracle cure, just set the stage. And there is a need for

strong local stories.


33

3. REINVENTED NATIONAL WAYS

Fair global conditions are thus not enough, but they are a pre-condition for

nation-states, including the EU, to develop their own strategies to beco-

me competitive and successful on the global markets. And within national

frameworks cities must develop niches build upon their strengths. Regions,

countries and cities compete, not just companies. There is a need of solutions

that are inclusive and sustainable and steer the economies towards full

employment, ensure a fair distribution of wealth and income, and provide

good public services. The primary aim of public policies should be to

support everyone to pursue their life projects; it cannot be to satisfy finan-

cial markets.

But the way countries do it will and should differ. The Anglo-Saxon way of

life has features which are different from those of the continental European,

the Indian and the Chinese ones, which in their turn differ from the Nordic

way. I am a Swede and I make no excuses for my view that the Nordic

model is my own preferred choice, but I would disapprove of a world in

which this option was forced upon others.

But there is also commonality. A new Global Story enables countries to

adopt a new growth paradigm that combines smart, sustainable and inclusive

growth. When Keynesianism went too far, market liberalism was carrying

the day. In its extreme form, neoliberalism, its claim was that markets are

best left on their own. We now know, or at least insightful economists know,

that this was not true. Markets need oversight, and not only the financial

markets. The global market economy will not deliver benefits to all without

politics and inequality, which hampers growth, is getting out of hand

without it.


34

A misguided laissez-faire has not been the only questionable feature of a

neoliberalism gone too far. One odd phenomenon on national level is the

creation of markets that does not exist. Venues have been separated from

their users and universities have, just as one example, been forced to rent

their own premises from an invented landlord, as if there was a market

price on renting a laboratory for physics. The effect is a heavy build-up

of administrative costs. It would be laughable, if people did not take it so

seriously. The neoliberal school has another major mistake on its failure

list. Research has shown that the level of trust in a society is paramount for

economic efficiency and success. The School has contrary to this convin-

cing research embarked on a breakdown of trust in public services. Doctors,

nurses and teachers are not to be trusted, they must be controlled and they

should report everything they do, even if no one reads the reports. There is

really no one you can trust but the administrators according to the School.

The effect, when their destructive ideas have been implemented, is high staff

turnover, ballooning administrative costs and a declining trust between the

public and the services.

Smart growth.

Smart growth is driven by new knowledge and technological development.

The progress has been so fast the last decades that many have questioned if

it can continue and have predicted a slow-down. This is a faulty conservative

perception. We have seen nothing yet. With Artificial Intelligence, will follow

dramatic changes in our lives. And that is just a start. Nanorobots that can

repair our bodies from the inside, genome technology that frees us from

hereditary diseases, energy harvesting that will make energy production

obsolete and cars that take us from A to B without our involvement are all in

the pipeline. The question is which countries that will produce leaders with

insights and vision to capture the opportunities. Because that is what smart

growth demands. Leadership. And entrepreneurship.

There is a fountain of knowledge available on what makes innovation

systems effective. But for some reason it seems that the know-how is repe-

atedly forgotten and has to be regained, even by countries whose successful

companies and strong exports can be traced to historically powerful

innovation systems.


35

Researchers have convincingly shown that the ideal systems comprise a

coherent chain without weak links, entail world-class education, focused

and relevant research in an inspiring cluster environment often driven by

pre-commercial public procurement, entrepreneurial spirit, an efficient IPR

regime, accessible seed money, a risktaking first buyer and venture

capitalists with a long-term perspective. But it seems that an innovation

system to be sustainable demands insightful public support from some-

one in power, an institution or a culture shared by many and that is often

missing.

Sustainable growth.

The necessary transition into a greener and less energy-intensive economy

offers an opportunity for countries to use their purchasing power to

stimulate innovation and thereby create new products and services for the

world market.

To reduce the carbon footprint and thereby halt climate change demands

actions in mainly three fields. Investments need to be made in new energy

systems, new transport solutions have to be found and construction should

be made in new materials.

Increased energy efficiency is key, but we will always need energy supply.

The three carbonneutral and long-term solutions are solar energy, hydro

power and energy harvesting, and they have one thing in common. They

need electricity as a medium. The conclusion is that we should move as

many systems as possible from dependence on oil or renewable energy

sources that create carbon dioxide to systems supported through electricity.

This includes transportation systems. Cars and lorries must have easy access

to electricity, and so do aeroplanes. It is a huge transformation that demands

public investments over a long period of time. The catch is that the public

finances are so stretched that there is little room for the necessary investments,

showing the importance of public debt restructuring and proper domiciliation

of income.


36

The use of concrete in construction is another major contributor to climate

change. Houses have to be built, but they should be built in other materi-

als. Steel is a better option than concrete, but not as good as wood. With

modern technology, it is possible to build skyscrapers in wood that are as

fire-resistant as concrete, and with a neutral effect on carbon emissions.

A more circular economy, where products are designed for ease of recycling,

reuse, disassembly and remanufacturing, would also make growth more

sustainable. It now takes the Earth almost one and a half years to

regenerate what we use in a year. A paradigm shift would create positive

effects on growth and jobs and is a major prerequisite to stay within the

Planetary Boundaries.

Inclusive growth.

There is a cultural difference between Europe and the US that must be

recognized. While Europe has a faulty tendency to believe that old

grandeur will last for ever, many Americans are living an improbable dream.

The American Dream is that anyone can reach the top; become one of

the 0.1 per cent that makes it, get the billions and the girl, the apartment

on Fifth Avenue and the huge beach mansion on Long Island. The truth,

however, is that it is less and less likely. Statistics show that social mobility is

in decline, but few seem to realise it.

It is an old, but forgotten, insight that a broad demand from the Ninety Percent

is needed to fuel economic progress, which researchers at the IMF and other

places now have rediscovered. It directed the US response to the Great

Depression but had no impact on the policies following upon the Great

Recession. The policy response in 1933-1934 was to increase the income of

the 90% by 8.8%, financed mainly by a reduction in the income of the top

0.10% of 3.4%. This redistribution helped to bring the US out of the Great

Depression. The answer to the latest crisis has been very different. During

2009 and 2010, the income of the 90% continued to decrease by 0.4%, while

the 0.01% increased their income by another 21.5%.ix The continuous amassing

of the riches by a few citizens has undermined the purchasing power of the

vast majority and has, as an undesired effect, prevented the increased aggregate

demand that would have motivated new industrial and other investments.


37

But most Americans don’t buy into those economic arguments. It is more

important to keep the Dream alive than to assure that everyone is

benefitting from economic progress, many seems to think. In the three

latest elections, a majority have voted in favour of more inequality, even

demanding that the right to healthcare for the poor and elderly is reduced.

The American way is clearly not the European way, which just shows how

important it is to create global market conditions that allow every nation to

develop its own social conditions; for Europeans to refurbish their Venus and

for Americans to enrich their Mars, or at least 0.01 percent of it.

Not only has inequality increased as a consequence of a misguided neoliberal

economic policy, the simultaneous proclamation of the demise of the wor-

king class was premature. The changing character of the labour market has

not made it class-free. The attendants in the supermarkets are often abused

and suffer working conditions that industrial workers have not accepted

for decades. They need the support of unions in the same way the factory

workers did. The low rate of association should not be seen as progress but

as a warning signal.

The labour market of the future also challenges one aspect of the identity

politics of the Left, namely that it is only the lack of opportunities for women

that needs to be focused. Most new jobs are to be found in the continuous

outsourcing of work from the homes and in the support of an ageing po-

pulation. As these jobs are of a type that traditionally are female, there is

a need to slightly revise the gender agenda. A challenge of the future is to

upgrade the perception of those important tasks so that they become attractive

also for the young low-educated men who now are looking for a future.

There is still a lot to do in order to bestow women the same opportunities in

traditionally male jobs. But the opposite is also true.

Likewise, there is a need to rethink taxes. Capital taxes are generally lower

than taxes on labour, which makes no sense. The lower the taxes are on

labour the more the available jobs will increase as will the opportunities

to support yourself and your family without being dependent on state

subsidies.


38

Furthermore, new technology is creating a shared economy with many op-

portunities. But it is also offering new types of working conditions in which

many in practice are self-employed without the living standard and income

that normally is attached to that kind of work. They need the support of

spokespersons who represent their interests and an adaptation of tax sys-

tems and social insurances to these new realities.


39

4. SHAPING THE FUTURE

There is hope. The indifference to societal issues that for so long has

dominated the public space is about to disappear. The young show the

same engagement in the future of society and nature as their grandparents,

who now are elders, once did. With a difference. The young tend to distrust

both the democratic system, the political parties and the markets. Some of

them are sadly enough captured by the rejection of Modernity expressed by

the populist Right, but a majority are attracted by an open, border-free,

sustainable and inclusive world and see opportunities in social entrepre-

neurship that challenges existing structures, not in order to close borders

and reject globalisation, but to make the order work in a fairer way and en-

sure a future in harmony with nature. The elders may more than the young

see the need of a new marriage between markets and politics, a Democratic

Capitalism for the Twenty-First Century, which can be trusted to deliver on

its promises, but they must understand that young shapers of the future

have to be engaged in new ways, be invited to co-create, not just be served

prepared solutions.

If the collective energy of young shapers and elders, can be mobilised it

could make a difference. Governed the right way globalisation and

technology progress can still benefit the whole of mankind, but it will not

happen if is not driven by stories told and retold by young shapers as well

as by elders who start to believe that there can be a positive future for all

and for generations following in our footsteps. Any story will remain in the

library of fairy tales if it is left on its own. It is like a small creek. It will only

gain strength if it joins other small creeks heading in the same direction, if

the creeks can create a stream joining other streams to form a mighty river

with torrents that no one can ignore.

It has obviously been a mistake not to take the rise of Darkness seriously

and show tolerance towards the enemies of Modernity. The fight to regain

lost territory must begin in earnestness and there are many that can contribute.


40

It starts in the schools. It is time to stand up towards the idea that

creationism should be taught as an alternative fact or that expressions of

patriarchism should be accepted. Religious fundamentalism should not be

respected but fought, just as during the Enlightenment.

Intellectuals can contribute by developing the arguments in articles, set up

and create theatre plays with Enlightenment values and rethink the often

questionable values that TV series and reality programs convey. Scientific

academies that were created during the Enlightenment have become fora

for social recognition but were once the foremost carriers of Enlightenment

values. They must understand what is at stake and revive their old roles.

Progressive churches could also get involved and take a stand against the

fundamentalists, just as during the Enlightenment.

Social media has developed from informative blogging over real time

Facebook to fifteen words abusive twittering. The Twitter format is suitable

for bullying and alternative facts, but not for Enlightenment that mostly

demands elaborate reasoning. Social entrepreneurs could get themselves

involved in the development of new forms of social media that supports

Enlightenment. The answer probably lies in co-creation. Only stories to

which they can contribute will keep the attention of the Young.

Democracy is dead without a Public Information Space that treasure

science and evidence over religious beliefs and alternative facts. Media

with journalistic ambitions that fill a public service role need to be supported

by public funds in whatever technical form they choose – the written

newspaper, the electronic version, the radio or the TV.

Decision processes must be transparent, inclusive and invite co-creation This

is especially important for the rule by and of law of the global markets as

there otherwise will be a lingering suspicion that the process is high-jacked

by an elite which could not care less about the ninety percent.

As global and local stories are put together into glocal stories and find their

channels and their way to the dining tables, the bars and the workplaces,

there can be no final version of the scripts. The narratives should evolve as

they are retold and features are debated, confirmed or rejected.


41

5. NOTES

i Toynbee, 1960

ii A study presented by the charity Oxfam at a World Economic Forum 2013

iii I continue with the simplified description of the political system. The

nation-state may have delegated some of its functions to regions and communes;

it may have entered a federation or a union such as the European Union and

transferred some its decision power to the federation or the union. Such

conditions do not change the principle arguments.

iv Berg and Ostry, 2011

v Britt, 2003, p 20

vi Lakoff, 2016

vii David Brooks, quoting from a paper by his student Victoria Buhler in the

International Herald Tribune, 30-31 March 2013

viii Referring to the Paris Club involved in debt restructuring ix Source:

Piketty and Saez from Internal Revenue Services, IRS


42

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