Politicians keep pledging to return the economic boom and restore Western greatness. They can’t. The best days of the West are behind us — and that may be a good thing.
I was recently struck by the juxtaposition of two documentaries as I flipped lazily through the channels one evening. Having just finished watching David Olusoga’s BBC documentary Britain’s Forgotten Slave Owners, I landed next door on Channel 4’s Dispatches: Escape from ISIS, which revealed the enslavement of Yazidi girls in the Islamic State. The few scattered reports we receive out of the self-declared caliphate, whose leader Abu Bakr al-Baghdadi (pictured above) has reportedly said he will ‘march on Rome’ (i.e. the West) conjure visions of a Dark Age ruled by vicious warlords: a blend of religious fanaticism and Mad Max. In fact, the post-apocalyptic genre to which that summer blockbuster belongs seems to be if anything growing in popularity, to judge by the book sales and box-office receipts for series like Hunger Games or Divergent. It’s really just the mass-market face of the sort of highbrow musings on Western decline we get from the likes of Niall Ferguson. It’s as if, consciously or otherwise, we are aware that our civilisation is threatened and worry where this may lead us. However, the paradox of a civilisation’s decline is best captured in J.M. Coatzee’s novel, Waiting for the Barbarians, and it is here that Olusoga’s documentary is so poignant: great civilisations like ours are built atop a foundation of oppression which is itself — as evidenced from the snippets out of the planter Thomas Thistlewood’s diary that the show recited – often barbaric. As Coetzee’s masterly novel conveys, it’s not clear who the barbarians we await with trepidation are: foreign invaders who are, like ISIS today and Attila the Hun in the late Roman Empire, eating away at the outer edges of our empire; or ourselves, worried that some cosmic justice will be rendered if we suffer all the violence we once did to others.
This is a pertinent theme for me because I happen to be writing about it a lot these days. Yes, modern barbarians have breached our outer defences, and we in the West are withdrawing into our defensive bastions just as any retreating army does. As I wrote in a recent blog-post on the ISN website, the West’s ability to impose itself militarily on the rest of the world is rapidly diminishing. While this has led politicians like David Cameron to insist Britain will not retreat from the world — even though it very obviously is doing just that — or American Republicans to criticise President Obama for being weak, the fact is that the underlying economic resources to support continued military expansion no longer exist. The simple fact is that the West is, in relative terms, in long-term economic decline. After two centuries in which the ratio of incomes in the rich countries to those in the poor ones widened from rough parity in 1800 to reach the point that in 2000, they stood at 60:1, the West peaked. In that year, the sixth of humanity living in the developed countries of the West (Western Europe, Canada, US, Australia, New Zealand and Japan) consumed four-fifths of the planet’s output. Then things started moving in the other direction and today, the West’s share of global consumption is down to three-fifths, and falling.
Now, Jeb Bush will stand before an American audience and say he’ll restore growth to four percent a year. No he won’t. He, and any other Western politicians who make such bold predictions have about as much chance of restoring the growth rates of old as King Cnut did in beating back the waves, and for much the same reason: all the human will in the world can’t resist an oceanic tide. The best you can do is swim with it.
Take a look at this graph. It plots a trend line of growth in the West in the half century after 1965. Although there are the usual variations from one year to the next, the underlying trend is hard to escape. In the generation after the Second World War, annual GDP per capita growth rates in Western countries averaged around 6%. They have been trending downwards ever since. Currently, trend growth has been getting close to one percent, and there may be little reason to suppose the direction will change. At the moment, the UK and US lead the way among Western countries in their rebound from the Great Recession, and current forecasts are that strong GDP growth in the order of 2-3% will continue into next year. Half a century ago, ‘strong’ growth for these economies was something in the 6%-7% range.
There is some debate among economists about why this should be. One obvious factor is the demographic slowdown. In line with a global trend, population growth in the West has been declining in recent decades. In some countries, like Germany and Japan, it has already turned negative. Given that a large share of the economic growth of the past two centuries resulted from a population boom, the convergence back to the historic mean we are seeing in the ‘demographic transition’ will take economic growth rates with it. In addition, there is growing evidence that the rate of productivity-enhancing technological change is also slowing. In his recent book, The Great Stagnation, Tyler Cowen synthesises the arguments neatly and paints a picture of past productivity surges based on ‘low-hanging fruit’ that hints strongly that our best days are behind us. Faced with sluggish growth and weak prospects, many will reach for the get-out-of-jail card of an impending technological revolution. Politicians for years have been saying we’re on the verge of some new breakthrough whose impact will be as profound as the invention of steam energy and electricity, and of course their supporters in the tech industry are only too happy to egg them on. We have yet to see it, and after thirty years of this talk, one is entitled to ask ‘where’s the beef?’ In his recent paper The Demise of U.S. Economic Growth, America’s leading expert on productivity, Robert Gordon, speaks for a widening consensus among economists in arguing that we have been mistaken to extrapolate future growth from past performance. Earlier expansions due to technological innovation, he suggests, may have been the exception rather than the norm. Cowen echoes this judgment in pointing out that while technology is today transforming our lives and in many ways improving them, that in itself is no reason to infer any changes to our economic performance as a result of them. We love the Internet. But there’s no evidence that Facebook and Twitter have in any way made us more productive. Just guessing from the frequency with which I check my own feeds, I wouldn’t be surprised if I’m less productive today than I was before the invention of viral kitten gifs.
This could be the best thing to ever happen to us. We may indeed be on the cusp of a new age in which technology will improve all our lives profoundly. But we may equally be teetering on the brink of a Dark Age in which more and more of the world is carved up by ISIS-like warlords and criminal gangsters, something I first warned about nearly ten years ago in an article in Foreign Affairs called The New Middle Ages. The West has in fact reached a fork in its road: turn one way, and we could conceivably enter an age of greater peace and prosperity for all, turn the other and we could slide into an abyss from which our civilisation may never re-emerge. To understand that choice, one has to go back into history and see that this course is not new. Other empires have been here and made the wrong choices. We can learn from their mistakes.
But first, we need to broaden our focus, well beyond the confines of the modern Western empire and to the periphery that is producing the warlords who threaten us. The periphery always makes the empire, whether it makes it greater or brings it low. That will be the topic for my next blog post in this series, but here’s a hint of what’s to come. The graph below plots the same data as the earlier one, except this time for developing countries — the periphery of the modern West, much of which comprises former colonies of Western countries. What’s striking is that it is almost a mirror image of our experience — especially when one looks at the period following the deep trough one sees in the 1980s. While Western growth is approaching zero, the rest of the world is speeding up.
This is not a coincidence. To see why, check out my next blog post!