Despite war and economic crisis there is hope for human progress

There is immense hope for human progress despite the seemingly endless intractable wars and repeated economic crises, writes think-tank vice-president Kemal Dervis
Despite war and economic crisis there is hope for human progress

The year 2015 was difficult, punctuated by horrific terror attacks, massive refugee flows, declining growth forecasts, and serious political challenges, with populism on the rise in many countries.

In the Middle East, in particular, chaos and violence has continued to proliferate, with devastating consequences. This represents a disappointing turn from the undoubtedly flawed, but far more hopeful world of just a few decades ago.

Rebel fighters in Syria

Rebel fighters in Syria

In his autobiography The World of Yesterday, Stefan Zweig described a similarly drastic change.

Born in 1881 in Vienna, Zweig spent his youth in an optimistic, civil, and tolerant environment. Then, starting in 1914, he witnessed Europe’s collapse into the First World War, followed by revolutionary convulsions, the Great Depression, the rise of Stalinism, and finally the barbarism of Nazism and the outbreak of the Second World War.

Devastated, Zweig committed suicide while in exile in 1942. One imagines that Zweig would have been comforted by the post-war creation of the UN and the Bretton Woods system, not to mention the subsequent decades of reconstruction and reconciliation.

He could have witnessed the co-operation and progress that marked the postwar era. Perhaps, then, he would have looked at the period from 1914 to 1945 as a terrible but limited detour in the world’s march toward peace and prosperity.

Of course, the second half of the 20th century was far from perfect. Until 1990, peace was secured largely by the threat of mutual nuclear destruction.

Conflicts, such as in Korea, Vietnam, parts of Africa, and the Middle East, took their toll. And while about 100 developing countries gained independence, the process was not always peaceful.

At the same time, however, the world economy grew more rapidly than ever. A strong middle class emerged in the advanced countries, and then began to appear elsewhere. The Western democracies and Japan built economies in which productivity growth led to shared prosperity; governments engaged in regulation and redistribution, while private companies fuelled growth by implementing technologically advanced production methods.

On both the regional and global levels, decisive progress was made in reaping the benefits from trade and economies of scale. The European integration project seemed to herald a new kind of co-operation, which could extend to other regions and even influence global cooperation.

The generation that came of age in the 1960s felt much like Zweig had felt in his youth. We believed that, though progress may not be linear, we could count on it. We expected an increasingly peaceful world, in which technological advances, together with well-governed markets, would generate ever expanding prosperity. In 1989, when the Soviet Union was poised to collapse and China was shifting to a market-based economy, Francis Fukuyama announced the “end of history”.

Over the last two decades, however, our hopes — political, social, and economic — have been repeatedly dashed. There was a time when US policymakers were wondering whether Russia should join Nato. That possibility is difficult even to consider today, after Russia’s intervention in Ukraine and annexation of Crimea (apparently carried out in response to fears that Ukraine would deepen its ties with the European Union and Nato).

Pro Russia demonstrators in Crimea

Pro Russia demonstrators in Crimea

Many emerging economies achieved rapid growth for years, even decades, enabling billions of people to escape extreme poverty and reducing the wealth gap between developed and developing countries. However, that growth has lately slowed substantially, leading many to question if economists spoke too soon when we labelled them the new engines of economic growth.

Likewise, the Arab Spring in 2011 was supposed to herald a new, more democratic future for the Middle East and North Africa. While Tunisia has averted disaster, most of the other affected countries have ended up mired in chaos, with Syria’s brutal civil war facilitating the rise of Islamic State.

The euro, meanwhile, suffered its own crisis. The common currency, once portrayed as the start of a quasi-federal Europe, instead created serious tension between ‘creditor’ and ‘debtor’ countries when many debtors faced a protracted economic downturn. Just as Europe seemed finally to be escaping the euro crisis, refugees, especially from Syria, began flooding in.

That has jeopardised the Schengen area of borderless travel, and some are asking whether the EU can withstand the pressure. In the US, the Syrian refugee crisis has led Congress to rush to restrict visa-free entrance for tourists from 38 countries. This comes at a time when income and wealth inequality is skyrocketing in the US — the median wage for men has not increased in decades — leaving many to wonder whether their children will be able to maintain the living standard they had. On top of all this, for the first time in decades, the growth of international trade no longer comfortably exceeds the growth of global output.

Syrian refugees

Syrian refugees

A fundamental driver of many of these problems may well be the unprecedented speed of change — driven by globalisation and technological innovation — which produced disruptions too quickly and on too large a scale for us to manage. For example, while communication technology has done wonders, say, to expand access to finance in Africa, it has also let terrorist networks encrypt their messages effectively. And, as the global financial crisis starkly demonstrated, regulators have struggled to keep pace with financial innovation.

The potential for human progress still seems immense, because the world wants for neither resources nor technological innovation. Indeed, technology offers the hope of lifesaving medical treatments, higher economic productivity, and sustainable energy systems. However, people are fearful, as shown by the return of identity politics and a lack of economic and political inclusiveness. As a result, productivity growth is slowing, and, though capital seems cheap and profits plentiful, investment remains sluggish.

The key to managing the disruptions and assuaging people’s fears is governance. Zweig saw the world fall apart a century ago not because human knowledge stopped advancing, but because of widespread governance and policy failures. As we enter 2016, we must focus on adapting governance, in all of its economic and political dimensions, to the 21st century, so that our resources and knowledge produce inclusive progress, not violent conflict.

Kemal Dervis, former minister for economic affairs of Turkey and former administrator for the UN Development Program, is vice president of the Brookings Institution.

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