The British vote in favour of an exit from the EU has thrown the UK’s political system into chaos and shocked Europe and the world. The long-term consequences of this vote are still unclear, but some fear it could trigger the undoing of the UK and accelerate the disintegration of the EU. Many see this outcome as a new victory for populist movements, which are on the rise across much of the Western world. Something more fundamental, however, might be at play.
A tale of two disunions
The British citizens’ vote in favour of an exit from the European Union has thrown the United Kingdom into an unprecedented crisis and sent shockwaves across Europe and the world.
Prime Minister David Cameron, who seemed to have won a convincing re-election just over a year ago, stepped down and announced that he would leave it to his successor to deal with the fallout of the referendum result. The race to succeed him as Conservative Party leader and Prime Minister is on, and is likely to leave the party bitterly divided and weakened for years to come. The opposition Labour party is also left in tatters, with leader Jeremy Corbyn – elected less than a year ago in a landslide – facing an internal revolt after failing to convincingly campaign in favour of remaining in the EU. Meanwhile, the referendum results are also reviving divisions and tensions between the nations that compose the UK. Scotland – which voted overwhelmingly for staying in the EU – has made it clear that it would not be forced out of Europe against its will. The Scottish Parliament may withhold the consent needed to pass the UK legislation required to leave the EU, which would throw the country into an unprecedented constitutional crisis, and the Scottish Government may call a new referendum on independence, which if successful would end the 3-centuries-old union between Scotland and England. Northern Ireland, which also voted in favour of remaining in the EU, could be tempted to go its own way as well, and maybe even to leave the UK for joining the Republic of Ireland.
The UK’s political system – in fact, the UK itself – now appears to be at risk of imploding. In a matter of days, one of the world’s seemingly most solid and stable democracies has been thrown into chaos. Across the nation, the blame game is in full swing, and bitter recriminations are flying. Some accuse David Cameron for his recklessly irresponsible gamble, which was apparently mostly aimed at settling the European question within the Conservative party once and for all, but ended up blowing up everything. Others blame Boris Johnson, the charismatic and popular former Mayor of London, who opportunistically threw his weight behind the ‘Leave’ campaign in order to take his former buddy’s place at the helm of the party and in Downing Street, but ended up being part of the wreckage, incapable of outlining a credible plan for the country outside the EU and even of competing for the Conservative party leadership. Most blame the populist tactics of the UK Independence Party (UKIP) and of its colourful – and now departing – leader Nigel Farage, who spent years campaigning for an exit from the EU, distorting facts and propagating semi-truths or even outward lies in the process. Many also accuse the British media, dominated by a tabloid culture that for decades has distorted political reporting and framed the EU debate – and pretty much everything else – in an ever-more simplistic and hysterical way. Some also point out the delusional, post-imperial cognitive disorder that still seems to linger on in parts of the English society, convinced that the EU is a continental plot to dominate Britain and that breaking away from it will help the country reassert its past power and greatness. Let’s ‘Get Our Country Back’, the story goes, and we will ‘Make Britain Great Again’…
Needless to say, the referendum results have left a large part of the British society in a state of shock and utter disbelief. Nobody, it seems, had really anticipated this outcome. Most of the ‘Remain’ voters are genuinely dismayed and are struggling to come to terms with the fact that a majority of their countrymen voted them out of the EU. They feel betrayed and angry, let down by a country that they think just decided to sacrifice their present, their future and that of their children. It’s now their turn to want their country back, the ‘Cool Britannia’ they grew up in and that suddenly seems to have vanished like a mirage. The ‘Brexiters’, they think, are surely just ‘Little Englanders’ who resent the country’s successful globalisation drive, xenophobic bigots who reject the successful multicultural society that Britain has become, losers who want to bring down the rest of the country with them, old and fearful people who want to hold on to their privileges at the expense of their children, or at best a bunch of uneducated, poorly informed and gullible folks who have proven to be easy preys for shameless demagogues.
For most of the ‘Remain’ voters, something has gone terribly wrong and “democracy has failed us”, as singer Damon Albarn claimed on stage at the Glastonbury festival. Some call upon the British Parliament to reject or ignore the result of the referendum, which in itself is not legally binding. Some want this result overturned, and millions have signed a petition to run a second referendum, apparently convinced that many of the ‘Leave’ voters already understand and regret their mistake. Some vent their anger on social media and take to the streets in protest, apparently hoping that Brexit can still be stopped. Some are not so convinced and are rushing to apply for citizenship and passports from other European countries. Others start questioning the legitimacy of popular referendums or even of universal suffrage, which has the great defect of giving no more weight to the enlightened vote of a young, urban and open-minded professional than to the foolish vote of an old, racist and uneducated loser. The atmosphere is poisonous, and polarisation has never been so pronounced. The nation’s wealthy, dynamic and cosmopolitan capital city, which elected a Muslim Mayor only weeks ago and where a large majority voted to stay in the EU, suddenly feels estranged from the rest of England and wants more autonomy. Across the country, families are torn apart by bitter dissensions. More than at any time in living memory, it looks like it wouldn’t take much for the UK to descend into some spiral of political violence.
The Brexit blow has been no less powerful on the other side of the Channel. There again, it seems that nobody really believed that British voters would dare to do it. Of course, the UK has been an uneasy and even reluctant member of the ‘European family’ for decades, never fully engaged and staying away from some of the bloc’s most integrated policies, in particular the single currency and the border-free Schengen travel zone. However, it seems blatantly obvious from the continent that the UK has benefited immensely from its EU membership, through gaining access to the world’s largest market and acquiring strong influence over its political direction and regulatory regime. British influence has in fact been on the rise in Brussels over the last two decades as Brits have been steadily gaining ground in the EU’s bureaucratic machinery, but also in the growing armies of lobbyists and lawyers, contractors and consultants that gravitate around it and influence its work in various ways. English has become the lingua franca of the EU’s business, giving British nationals an often-neglected advantage over continentals, and Anglo-Saxon free-market capitalism has progressively displaced French-inspired technocratic dirigisme and German-type social democracy as the unofficial but dominant ideology of the European project. All of this, in addition, has been obtained for a reduced membership fee, as the UK has been benefiting from a rebate on its contribution to the EU budget since 1984. Viewed from Brussels and from most European capitals, the UK has in fact had an incredibly good deal for decades, one that nobody in their right mind would consciously reject to suddenly and foolishly jump into the unknown.
The UK’s decision to leave the EU has thus left most of Europe stunned, and in some cases angry and resentful. The result is all the more infuriating that some of the UK areas that voted most largely in favour of Brexit are remote areas that tend to benefit from generous EU subsidies. Many on the continent therefore want the UK to initiate and complete the exit process as quickly as possible, rejecting any ‘informal’ negotiation before London actually invokes article 50 of the Lisbon treaty – something that David Cameron intends to leave to his successor. Others are more willing to let the dust settle and warn against the risks of rushing the exit. All, however, are unlikely to be willing to be generous with London once the formal negotiations start. The promise of the ‘Leave’ campaign’s leaders to safeguard Britain’s access to the EU’s single market without having to abide by its regulatory standards, granting freedom of movement to its citizens or contributing to its coffers is unlikely to be kept, as EU negotiators will want to avoid making anyone think that exiting the EU can be without costs.
In Brussels and in a number of continental countries, in particular the six founding members, some want to see Brexit as an opportunity for the EU to finally get its acts together and make a leap towards a ‘better’, i.e. more integrated Union. They point out that Britain has been a major impediment to further integration for decades, and some even believe that a lot of what is wrong and dysfunctional about the EU results from Britain’s systematic sabotaging of the project. With the UK out, they think, the march towards ‘ever closer union’ will finally resume, and citizens will start loving the EU once again. Some French commentators even start dreaming about a return to the good old days of the ‘Franco-German motor’, when Paris was in the driving seat and Berlin happy to go along, and when the EU’s bureaucracy was mostly speaking French. English may in fact now have to be dropped as an official language of the EU, since no other Member State than the UK notified it as its official idiom. However, this is likely to be resisted by a majority of Member States, in particular the anglophile Northern and Eastern European countries whose accession to the EU was championed by the UK, or even Germany that has no intention of giving up the bloc’s driving seat. In addition, there is no real appetite for any Paris- or Brussels-inspired integration leap in most EU capitals, including in Berlin where there is dwindling trust in France’s capacity to revive its sclerotic economy and in the European Commission’s leadership. Except maybe in some quarters of Brussels’ EU bubble that tend to indulge in groupthink, Europe has for a long time realised that the federalist dream was nothing else than a dream.
In fact, the outcome of the UK referendum is much more likely to further expose the EU’s fault lines than to trigger a renewed integration drive. Already, several Eastern European countries have launched very undiplomatic attacks against the European Commission’s president Jean-Claude Juncker, whom they accuse of not having done enough to prevent a British exit that they perceive as fundamentally detrimental to their interests. Those countries now want to have a bigger say in shaping the bloc’s agenda and policies, and they favour a more intergovernmental approach rather than a new push for integration. A rift between new and old members over the future direction of Europe is widening, which adds up to the already existing rifts between Northern and Southern members over the management of the euro zone and between Eastern and Western countries over the migration crisis. A rift that also adds up to what is arguably the most fundamental tension at the heart of the EU, i.e. the growing dissensions between France and Germany, who still pretend to jointly lead the bloc but “have long slept in the same bed with very different dreams”.
These compounding dissensions all but guarantee that no major overhaul of the EU’s governance and policies will take place anytime soon. Instead, the bloc will continue to muddle through and try to come up with supposedly ‘pragmatic’ common solutions to its mounting problems. Solutions that, if the recent past is of any indication, do not actually solve anything but just help buying time at best. This, it seems, has become the EU’s default operating mode. Any more ambitious approach is off the table as it would likely require a treaty change, and hence unanimity among the member states – which seems unattainable for the foreseeable future – and referendum ratifications in a number of countries – which national leaders will not dare to call for a very, very long time. Such referendums – or even exit referendums if they were to take place in other countries – would most likely give the same results as in the UK. In fact, the EU’s problem is less the British exit per se than the fact that the pursuit of the European project now seems unable to obtain citizen consent almost anywhere across the bloc. There lies the EU’s tragedy, the tragedy of a political construction that is becoming increasingly divided and dysfunctional but that cannot be fixed any more than it can be orderly undone.
Those in Brussels, Paris and elsewhere who now claim that Britain was blocking the EU’s march and rejoice at seeing it go might come to realise that the UK’s membership was maybe, on the contrary, one of the fundamental elements that was holding the complex EU edifice together. In fact, if Brexit might damage the British economy and may trigger the breakup of the UK, it is probably even more likely to accelerate the disintegration of the EU, which many fear is “now running at full speed” and some believe is “practically irreversible”. The London Stock Exchange took a beating in the wake of the Brexit vote, but continental stock markets literally nosedived, suggesting that international investors might be more concerned about the risk of an EU breakup than about the risk of the British economy getting into freefall. Concerns are mounting, in particular, over the health of Italy’s banking system. Italian banks have been struggling for years with a rising load of ‘non-performing’ loans and weak profitability in an environment of ultra-low interest rates. A fresh banking crisis might now be looming, which would be likely to further test Europe’s cohesion and raise renewed concerns over the permanence of the euro zone and the EU itself. This, in turn, would further boost those ‘populist’ political forces that seek to bring down the whole edifice and that are on the rise in a growing number of Member States.
The populist surge – or the stories we tell ourselves
The rise of populist movements, in Europe and now also in the U.S. with the advent of Donald Trump, is perceived by many as a major cause of the political crisis that seems to be engulfing the Western world. In this view, shameless politicians – ambitious demagogues at best, dangerous fascists at worse – propagate falsities and gross simplifications that resonate with the frustrations, irrational fears and prejudices of certain people and groups, while also feeding them. They use a complicit media system to their advantage, which amplifies their propaganda and widens their audience. Over time they build up popular support for their simplistic, divisive rhetoric and they end up disrupting or hijacking the democratic process.
When the progress of populist movements proves to be either irresistible or persistent, many then tend to assume that it is because their voters are typically ‘ignorant’, ‘stupid’ and ‘racist’. How else could it be that a majority of British people would want to leave the EU? How else could it be that so many U.S. citizens seem to be intent on voting for Donald Trump? These people must surely be just plain dumb…. This narrative seems to be increasingly widespread, in particular among the urban professional classes. It is a very convenient one, for at least two reasons. First, because it makes it morally legitimate to question and challenge electoral victories of populist movements, which are assumed to be obtained on the basis of lies and deceptions and/or to reflect the vote of ignorant fools. Second, because it makes it possible to ignore or even deny that people voting for populist movements or for the causes that these movements champion may have any kind of legitimate reasons for doing so.
These two reactions are clearly on display in the aftermath of the Brexit referendum, which outcome is perceived by many ‘Remain’ supporters as illegitimate and even morally outrageous, and which is seen as a victory of the ignorant over the educated, of the old and out of touch over the young and connected. The ‘Leave’ decision, in their view, is a victory of those who, out of frustration or sheer idiocy, want to get back to a country and a world long gone over those who are busy running the country today and inventing the world of the future. A victory of the people of yesteryear – old, intolerant, simplistic, bigoted, fearful and narrow-minded – over the people of tomorrow – young, cosmopolitan, complex, tolerant, innovative and creative. It should thus be resisted and, if possible, nullified, especially as the people of yesteryear are on their way out of this world.
The convenience and popularity of this narrative, however, do not make it right. First, it is at odds with the very concept of democracy, at least insofar as this concept has developed in the Western world over the last couple of centuries. A democratic society is a society in which the people make decisions about the ways in which they are governed. Democracy is about people having the right to make decisions, not about people having to make the right decisions. In a democratic society, those who believe they know what the right decisions are should be intent on persuading their fellow citizens – and not solely during referendum campaigns – rather than on invalidating or delegitimizing their vote. Their inability to be persuasive shows that a majority of citizens fail to find their arguments compelling, but it does not render the outcome of a vote democratically illegitimate. Second, this narrative can be counterproductive as it risks further antagonising those whose vote is dismissed and who may not enjoy being routinely called ‘old’, ‘stupid’ or ‘racists’. In the Brexit case, a second referendum would maybe give a different result as some ‘Leave’ voters may have second thoughts, but it would probably be even more likely to infuriate those whose vote would have been invalidated and to further increase division and polarisation, possibly leading to an even more resounding exit vote. Third, and perhaps more importantly, this narrative only provides a partial view of what is at play, and therefore obscures many other important factors that need to be taken into account to make sense of the situation.
There is little doubt that some of those who voted for Brexit are old, intolerant, fearful, racist, stupid and what have you – people who want to vote away a modernity they dislike and who are sure to end up being disappointed. It doesn’t mean, however, that population ageing, intolerance, fear, racism or stupidity are the only reasons Brexit won, or even the main ones. There is no evidence, in particular, that the populist surge across the Western world can be related to any sudden epidemic of stupidity. One could of course argue that the continuous stream of mindless entertainment Western consumers are bombarded with may be causing a general ‘dumbification’ of the populace, or at least that it may be hampering the cognitive abilities of certain people. Some scientific studies actually suggest that average intelligence, which increased during much of the twentieth century across the world, may have been going down at global level in recent decades. However, this downward trend, if it exists, should logically be affecting younger generations rather than older ones, and it is thus a rather poor candidate for explaining the allegedly ‘stupid’ vote of Britain’s oldies.
An alternative – and probably more convincing – narrative views Brexit and the populist surge across the West as an anti-establishment revolt by globalisation losers. Globalisation, in fact, has not been the win-win game that some of its supporters had claimed it would be. It may have lifted millions out of poverty and triggered the emergence of a middle class in developing countries, but it has at the same time, and in a pendulum swing, undermined working and middle classes in the West. First through the large-scale offshoring of manufacturing jobs towards emerging countries, and second through the effects of mass migration that has increased competition for low-skilled jobs, put continuous downward pressure on their compensation, and in some cases eroded social cohesion. For most workers across the Western world, real wages have been stagnant or even falling for decades, employment opportunities have dried up in many areas, and job and social insecurity have spiked.
These long-term trends are often ignored or dismissed by those who insist that globalisation has brought and is still bringing major economic, social and cultural benefits. That may actually be true, but in developed economies these benefits tend to accrue to some sections of the population only. These include those who derive the bulk of their income from capital investments, who in a globalised world benefit from vastly increased investment opportunities. More generally, these also include those who are equipped to find their place and thrive in the ‘service economy’, or who aspire to do so.
Across much of the Western world, the rise of the services sector that has been concomitant with globalisation has been driven by technological progress and, even more fundamentally, by the ‘financialisation’ of the economy. A rising share of nominal wealth creation – and of the workforce – has been derived from – or dedicated to – activities that fundamentally consist in pushing money around to make more money, and a myriad of other service activities have developed around those, being funded from the proceeds. These include a number of high value-added activities such as technology and professional services, but also a whole array of lower value-added activities such as restaurant waiters, bartenders, laundry, hair salon or retail jobs, and pretty much anything else in between including a variety of ‘creative industries’. For those who have the skills and connections to thrive in such service-based economy, i.e. the modern ‘elites’, globalisation, open borders – and by association the EU – mean vastly enhanced prospects and opportunities. For them, migrant workers, legal or otherwise, represent the willing and malleable workforce that is required to power the service economy they navigate in, as well as to put a cap on the price of a number of services they value and want to have access to. For those who, for a number of reasons, are not equipped or do not have the possibility to jump on the service economy bandwagon, globalisation and open borders mean a growing risk of disenfranchisement and social relegation. For them, migrant workers typically represent an illegitimate competition for scarce jobs, housing and public services, which undermines the value of their labour force, threatens their welfare and disrupts the communities they live in.
In most Western countries, globalisation has been feeding rising inequality between those two groups, and there is no evidence that it could be any other way. The populist surge that is now at play is, to a large extent, a reaction of those who have been on the losing side of this trend. They tend to be on average rather older, more rural and less educated than those who have benefited from globalisation or aspire to make their way into the service-based, globalised urban ecosystems and have reasonable prospects of succeeding. Deep down, however, the divide is much more about social class than about age or education. Our reluctance to recognise this reflects the extent to which class issues have become taboo in Western societies. We don’t like to talk about class divisions, we don’t want to see them, or we pretend they don’t exist or they are not anymore relevant, but that doesn’t make them go away.
The rise of populist movements is therefore a sign that a growing number of voters tend to perceive themselves as being on the losing side of things. Whether this perception corresponds to a statistical reality for all of them is debatable, but largely irrelevant: in politics, perception is reality. A growing sense of anxiety is spreading among those voters, as well as resentment and anger against an economic and political system that they believe is failing them. This is pushing an increasing number of them towards political movements that promise a clean break from this existing status quo or sometimes a return to a preceding state of affairs presented as more satisfactory or more reassuring. These movements’ narratives need not be coherent, credible or even sane; as long as they resonate with voters’ resentment or anger, they get increasingly popular. And most of the arguments typically used to try to lure voters away from these populist movements are ineffective or even counterproductive. Trying, for example, to scare people away from the Brexit vote by claiming that it will ruin the UK’s otherwise bright economic growth prospects is unlikely to change the minds of people who feel they have not been experiencing the benefits of economic growth for years.
The end of growth and the crisis of complexity – or the stories we choose to ignore
More than globalisation itself, the underlying cause of the populist surge might in fact lie in the slow disappearance of economic growth at global level, and in particular in the West. Almost a decade after the onset of the global financial and economic crisis that erupted in 2007-2008, the world economy remains weak and the hoped-for ‘recovery’ elusive. Everywhere, the economic policies conducted since then have largely failed to trigger the return to growth that was expected after the ‘Great Recession’. The unprecedented monetary stimulus unleashed by the world’s main central banks may have prevented a complete collapse of the global financial system and then kept it afloat, but it has done little to stimulate the productive economy. The only significant factor that has kept the global economy going in recent years – China’s runaway state-driven, debt-fuelled overinvestment, overcapacity build-up – is now slowing down sharply, pushing world growth further down.
This dearth of economic growth is causing significant disruption and generating major challenges in world that had previously become accustomed to rapid expansion, and where growth has come to be considered as the ‘normal’ and almost ‘natural’ state of things. In the West in particular, businesses assume that their revenues and profits should expand, consumers that their purchasing power and living standards ought to go up, governments that their tax revenues will naturally climb over time. Lenders and investors assume that borrowers will be able to repay their debts and businesses to pay dividends. All make their spending and investment decisions, as well as related long-term financial commitments, on the basis of the widely shared assumption that the economy will grow. Voters, in turn, assume that political leaders will maximise growth and use its proceeds to constantly increase societal welfare. To a certain extent, economic growth has come to form part of the Western social contract, and its absence is perceived by some as a breach by government of its tacit contractual obligations.
The assumption of – and need for – continuous and significant growth has become embedded in the world’s established economic, political and social order, to the point that economic growth has become a key requirement for this order to keep functioning and to remain stable. A prolonged period of low growth would in fact undermine this order in several and mutually reinforcing ways. In particular, it would be likely to hamper the rise of living standards, increase financial instability, volatility and distress, and exacerbate income and wealth concentration and inequality as the process of capital accumulation – i.e. the essence of capitalism – takes place in a context where there is no more ‘rising tide’ that could ‘lift all boats’. It would also make it increasingly difficult to maintain fiscal sustainability, generate rising social and political tensions, and increase the risk of political/geopolitical dislocation or fragmentation. To some extent, all of this is already happening.
There is indeed a growing sense that political and economic leaders across the world are increasingly at the mercy of economic and geopolitical forces beyond their control, most of which can be traced back to the slow disappearance of economic growth, and that are feeding a seemingly unstoppable rise of political instability in developed as well as developing economies. In the latter, this is often leading to a rise of authoritarian rule, and in the worst cases to the outright implosion of the established order; in the former, this is leading to a sort of slow-motion ‘sophisticated state failure’, whereby political institutions maintain a semblance of functionality but are getting increasingly incapable of solving the major issues facing complex societies. This evolution is increasingly undermining the liberal world order that has prevailed in recent decades, and even in some countries the foundations of liberal democracy itself. In particular, it is fostering intolerance and a retreat of individual freedoms; to a large extent, increased tolerance and the extension of the realm of individual freedom in recent decades have indeed been by-products of rising prosperity and of a widespread faith in a better future, which now seems to be evaporating.
Slow economic growth is not just an after-effect of the Great Recession but part of a deeper malaise that predates, and indeed may have helped cause, the financial crisis. A number of narratives have emerged in recent years to try to explain this global dearth of growth, such as the ‘debt overhang’ narrative, which states that growth is primarily hampered by an excessive indebtedness of economic agents, or various versions of the ‘secular stagnation’ narrative, which sees the cause of slow growth in a chronic shortfall of demand resulting from population ageing and the rise of income and wealth inequality, and/or in the diminishing returns of technological innovation. These various narratives probably all have some degree of validity. However, they tend to focus on developments that, even if they act as mutually reinforcing drags on growth, are in fact symptoms of the world’s economic predicament rather its deeper root causes.
Even more than from what most economists usually look at, i.e. constraints on capital and labour and on the productivity of their use, the slowdown of global economic growth since before the financial crisis might be resulting from factors that they typically ignore, i.e. constraints on the supply of energy and other biophysical resources that feed into the economic process and impact its functioning. In fact, the world’s capacity to create additional wealth is getting increasingly eroded by biophysical boundaries that over time tend to raise the acquisition costs, constrain the quantity and degrade the quality of the flows of energy and natural resources that can be delivered to the economic process, as well as by the constantly increasing costs of some of the economic process’ side effects (i.e. ‘negative externalities’ including environmental degradation and climate change), and the growing need to ‘internalise’ them into the price system. These biophysical constraints, as they increase, tend to weigh more and more on the economy’s productive capacity, thus eroding the potential for productivity and output growth.
The root causes of the long-term erosion of the world economy’s growth potential, therefore, may be related to biophysical constraints rather than to factors affecting just capital and labour inputs. As a consequence, policies aimed at boosting or reviving economic growth by targeting solely capital and labour inputs and the productivity of their use are highly unlikely – and, as a matter of fact, have failed in recent years – to deliver their intended results. Pursuing such policies would typically mostly lead to putting ever-growing pressure on those factors of production – and most particularly on the traditionally weaker factor of production, i.e. labour – to try to obtain productivity improvements and output growth that would consistently fail to materialise. In fact, continuous dual pressure on labour – upward on productivity, downward on compensation – has already been at play for several years, and this dual pressure is a major contributor to the populist backlash now underway in many countries.
Over the last decades, the industrialised world has found a workaround to biophysical constraints by expanding the reach of global capitalism but also and maybe more fundamentally by substituting debt accumulation to genuine wealth creation. This debt-fuelled growth, which has been instrumental in enabling the transition of Western countries to a service-based economy, imploded in 2008-2009 and has since then only been maintained on life support by the massive liquidity injections made by the world’s major central banks, as well as by the massive and compounding asset bubbles that have been blown as a result in developed as well as emerging economies. These injections and bubbles have so far prevented a brutal deflation of the financial assets that underpin the entire global financial and economic system, but the ability of central bankers to contain this deflationary spiral is dwindling as time passes and as genuine growth continues to be lacking.
In addition to weighing on economic growth, biophysical constraints – in particular the various rising constraints on the energy supply – may also negatively impact societies’ capacity to innovate and to maintain their level of complexity. As shown by American anthropologist and historian Joseph Tainter, human societies can historically be conceived as problem-solving organisations, which tend to develop ever-greater organisational and technical complexity in order to solve the social, economic and political problems they are confronted with. As their complexity rises, the problems they have to deal with become more difficult to solve, requiring growing investment in further economic and societal complexity.
A key determinant of a society’s capacity to develop greater organisational and technical complexity, according to Joseph Tainter, is its capacity to harness ever-growing supplies of energy. The availability of abundant, inexpensive, high quality energy has indeed been historically instrumental in the development of industrial societies’ capacity to build increasing complexity into their economic, technical, political and social systems. As biophysical constraints on the quantity and quality of energy and other resources rise, this ‘energy-complexity spiral’ may transition from being an upward spiral to being a downward one. Technical innovation that increases productivity may slow down this evolution, but research shows that innovation in industrialised countries tends to become more expensive and less productive over time, meaning that societies need to continuously step up their investments in innovation to continue solving problems through building up increasing complexity.
At some point, however, investment in socio-political complexity typically reaches a point of diminishing returns, meaning that the marginal beneficial returns (i.e. problems solved) of additional complexity begin to decline, leading to a lowered capacity to solve the new problems that arise and to deal with their consequences. These returns may even turn negative, at which point societies are not anymore capable of upholding the level of complexity they have reached. Typically, they then tend to break down to a lower complexity level.
Ever since their emergence, industrial societies have continuously become more complex, and they are continuing to do so. An example of increasing societal complexity is the development of sophisticated public health, welfare and redistribution systems aimed at safeguarding or enhancing social cohesion, which tend to become ever more complex over time and require ever-growing investments that many countries now struggle to keep up with. More recent manifestations of increasing societal complexity include the development of just-in-time global supply chains, the growing dependence of all critical systems and infrastructures on the Internet, or in another domain the increasing diversification of the ethnic and social make-up of Western societies. Diversified, multicultural societies are typically more complex social constructions than ethnically and culturally homogeneous societies, and they tend to be more complex to govern as a result.
In the field of governance, increasing societal complexity also includes the development of complex transnational political structures, such as the EU. As a governance system, the EU is more complex than the nation states it is composed of and builds upon. By historical standards, the fact that such a complex transnational governance system may have been put in place and made to work for a time is remarkable, maybe even miraculous. However, this system is now becoming increasingly dysfunctional, and the critical resources needed to make the additional investments in complexity required to solve its problems – in particular political capital – are missing.
The political crisis that is now engulfing Western countries, and more particularly Europe, suggests that we may be reaching or even have reached the point identified by Joseph Tainter where our standard way of solving the problems we face – i.e. investing in organisational and technical complexity – is yielding diminishing returns. If this is the case, we should not be surprised that more and more of our complex economic, technical, political and social systems are showing signs of stress, or even early signs of failure. As our capacity to invest in further complexity continues to get eroded by energy-related and other biophysical constraints, we should expect more stress to develop across the board, potentially leading to some sort of systemic breakdown and forced simplification. The growing popular revolts against globalisation, the EU, or multiculturalism are signs that our societies are already struggling to uphold their level of complexity and are subject to strong forces that are pulling towards a break down to a lower complexity level (i.e. localised economies, national governance, homogeneous societies, etc.).
These trends are largely obscured, however, by our habit of thinking about the problems we face in purely political terms, i.e. in terms of governance, leadership and policy choices, regardless of the historical circumstances in which they are made. If something doesn’t turn out the way we expect, we tend to blame policy-makers and the decisions they have taken or failed to take, or in some cases voters and the choices they have made. More rarely, we question the adequacy of our public institutions. Faced with the protracted crisis of the EU, we blame the current generation of European ‘leaders’ for their mediocrity and inability to rise up to the standards of their predecessors – even if those predecessors are precisely those who are responsible for building the EU’s dysfunctional edifice in the first place. We try to imagine solutions that would allegedly solve the EU’s problems, but we conveniently choose to ignore that the conditions and requirements for their adoption and successful enactment can probably not be fulfilled. By pursuing in this direction, we will most likely end up making policy or institutional choices that will fail to reach their intended objectives, and that will bring about new problems we will be unable to solve or even comprehend, and unintended consequences we will be unable to control.
As there are growing signs that we might be in a crisis of complexity caused by rising biophysical constraints and characterised by diminishing returns of investments in societal complexity, we are entering an era when circumstances will trump personalities and institutions. What we now need, hence, is not so much to find new political ‘leaders’ capable of designing and enacting grand plans to lead us further up the complexity pathway, but to ensure that we can make collective choices that are fit and appropriate for an age of scaling-down expectations. There is no sign that this could happen anytime soon, or even that it might be possible. It is therefore entirely reasonable to expect that our economic, technical, political and social systems might continue to become increasingly dysfunctional and drift towards breakup point. The journey to that point will probably continue to leave most of us puzzled, and will most likely be filled with the disturbing clamour of populist caudillos.