In a nutshell, three big and inter-related changes are under way. China’s appetite for US Treasury bonds, a cornerstone of the global economy for more than a decade, is waning. Beijing is ramping up its overseas development agenda to boost financial returns and serve key geopolitical interests. The promotion of the renminbi as an international currency is gradually liberating Beijing from the dollar zone, providing it with more latitude to open up to foreign portfolio investment flows.
Great powers rise and fall on the tide of history, but we lack the analytical tools to be able to map power transitions with any degree of confidence while they are actually occurring. The process of transition is not always peaceful and linear, but often jagged with friction. As the old and new powers cross each other on the way down and up, they create potential zones of tension that may lead to armed conflict through different pathways. A declining power may fail to recognize or refuse to accept its fading economic dominance, military might and diplomatic clout, persist in expecting and demanding respect due to its former status, and try to make the rising power pay for the perceived lack of respect. Conversely the rising but not yet fully risen power may exaggerate the scale and pace of its declining rival’s fall or its own ascent and provoke a premature confrontation.
Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy–but as this book demonstrates, America’s policymakers respond almost exclusively to the preferences of the economically advantaged. Affluence and Influence definitively explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. With sharp analysis and an impressive range of data, Martin Gilens looks at thousands of proposed policy changes, and the degree of support for each among poor, middle-class, and affluent Americans. His findings are staggering: when preferences of low- or middle-income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower-income groups or not. Gilens shows that representational inequality is spread widely across different policy domains and time periods. Yet Gilens also shows that under specific circumstances the preferences of the middle class and, to a lesser extent, the poor, do seem to matter. In particular, impending elections–especially presidential elections–and an even partisan division in Congress mitigate representational inequality and boost responsiveness to the preferences of the broader public. At a time when economic and political inequality in the United States only continues to rise, Affluence and Influence raises important questions about whether American democracy is truly responding to the needs of all its citizens.
Karl Polanyi: “The market mechanism moreover created the delusion of economic determinism as a general law for all human society.. To attempt to apply economic determinism to all human societies is little short of fantastic. Nothing is more obvious to the student of social anthropology than the variety of institutions found to be compatible with practically identical instruments of production. Only since the market was permitted to grind the human fabric into the featureless uniformity of selenic erosion has man’s institutional creativeness been in abeyance.”
Karl Polanyi considers this article to represent his first significant advance over the thesis presented in The Great Transformation, which attracted international attention as an original analysis of the dilemma of free enterprise capitalism as it affects our entire Western society. Dr Polanyi was born in Vienna in 1886, and was from 1924 to 1934 on the staff of the Oesterreichische Volkswirt, a leading financial weekly. When the clerical dictatorship was established, he emigrated to England, where he lectured at Oxford and the University of London, co-edited Christianity and Social Revolution, and wrote The Essence of Fascism. He was at Bennington College from 1940 to 1943, and will return to the United States this month as visiting professor at Columbia University. This article is twelfth in the series, “The Crisis of the Individual“.
What is it about free-market ideas that give them tenacious staying power in the face of such manifest failures as persistent unemployment, widening inequality, and the severe financial crises that have stressed Western economies over the past forty years? Fred Block and Margaret Somers extend the work of the great political economist Karl Polanyi to explain why these ideas have revived from disrepute in the wake of the Great Depression and World War II, to become the dominant economic ideology of our time.
Polanyi contends that the free market championed by market liberals never actually existed. While markets are essential to enable individual choice, they cannot be self-regulating because they require ongoing state action. Furthermore, they cannot by themselves provide such necessities of social existence as education, health care, social and personal security, and the right to earn a livelihood. When these public goods are subjected to market principles, social life is threatened and major crises ensue.
Despite these theoretical flaws, market principles are powerfully seductive because they promise to diminish the role of politics in civic and social life. Because politics entails coercion and unsatisfying compromises among groups with deep conflicts, the wish to narrow its scope is understandable. But like Marx’s theory that communism will lead to a “withering away of the State,” the ideology that free markets can replace government is just as utopian and dangerous.
Widening economic inequality is the academic topic du jour, but the trend of growing wealth and income disparity has been underway for several decades. How did mounting inequality succeed in proving culturally and politically attractive for as long as it did? Will Davies writes that rather than speak in terms of generating more inequality, policy-makers have always favoured another term, which effectively comes to the same thing: competitiveness. In this article, and in a new book, The Limits of Neoliberalism: Sovereignty, Authority & the Logic of Competition, he attempts to understand the ways in which political authority has been reconfigured in terms of the promotion of competitiveness. The years since the banking meltdown of 2008 have witnessed a dawning awareness, that our model of capitalism is not simply producing widening inequality, but is governed by the interests of a tiny minority of the population. The post-crisis period has spawned its own sociological category – ‘the 1%’ – and recently delivered its first work of grand economic theory, in Thomas Piketty’s Capital in the Twenty-first Century, a book dedicated to understanding why inequality keeps on growing.