By Yanis Varoufakis
Special to The Times Kuwait
Confident elites reflect viable regimes. Today, elites on both sides of the Atlantic are anything but confident. For the past year, they have been rubbing their eyes in disbelief that things have turned out the way they have.
In the United States, centrists are appalled that the masses seem so ungrateful for President Joe Biden’s economic successes that they are gravitating toward Donald Trump. In Europe, the sweeping gains of varieties of Trumpism at the expense of liberal icons like French President Emmanuel Macron and Germany’s Greens have caused similar despondency.
Across the West, the failure of draconian sanctions to dent the Russian economy, and the resilience of Chinese tech companies in the face of severe sanctions, is stirring up a mixture of nihilism and jingoism. Three myths underpin the collective frustration of Western centrists who once took their hegemony for granted.
The first myth is that the political center is, by definition, the far right’s greatest foe. The second is that of a representative agent, some fabled ‘average voter’, who decides elections. The third is that sanctions and tariffs would hold back China and Russia because of their dependence on Western technology, capital, and payment systems.
Each myth is worse than erroneous; all of them are misleading. Debunking them is a necessary, if insufficient, step toward making sense of the present.
Begin with the myth of a mighty clash between the center and the far right and ask: Would Macron’s rise from nowhere to become president of France have happened if Marine Le Pen and her National Front (as it was then known) were not a strong challenger? By all accounts, no. But would someone like Le Pen have become a strong challenger were it not for someone like Macron implementing policies that favor the already ultra-rich (through tax cuts and massive money printing) while allowing austerity to take an enormous toll on at least half the population? Again, no.
While there is no doubt that Macron and Le Pen (very much like the Democrats and Trump in the US) loathe each other, their power is symbiotic. The political center’s policy of state socialism for the very few and austerity for the many feeds the neo fascist right, whose rise feeds back into the center’s strongest claim to be the only bulwark against neofascism.
Now consider the myth of the ungrateful average voter recklessly discounting Western economies’ robust post-pandemic rebound. The only people who find Macron’s political meltdown puzzling, or who blame the US masses for failing to appreciate the great economy Biden has bestowed upon them, live in a world of spreadsheets of per capita statistics and macroeconomic data. For them, a decimal point of GDP growth here and a percentage point off unemployment rates there is supposed to make all the difference.
In 1992, Bill Clinton’s campaign mantra was ‘It’s the economy, stupid’. It still is. But the question today is: Whose economy? When you ask strugglers why they are angry at a time when GDP is growing, they reply: “Maybe your GDP is growing, but mine isn’t.” When you tell them that inflation has leveled off, they hit back: “Maybe your prices aren’t rising, but the ones I pay are through the roof!” To put it bluntly, it is entirely logical that, in our post-2008 world, the majority’s life prospects diminish amid glowing macroeconomic data.
Having overestimated their hegemony over their own populations, Western centrist elites proceeded to overestimate their power over external foes, Russia and China in particular. In both cases, the result of exercising this undeniably great power was precisely the opposite of what was intended.
In Russia’s case, the unprecedented Western sanctions in response to the invasion of Ukraine proved a godsend for President Vladimir Putin. His greatest weakness had been his limited authority over Russia’s oligarchs, who had been able to hedge their bets by keeping most of their loot in the West. But the sanctions gave Putin the opportunity to force them to choose between Russia and the West, sweetening that ultimatum with the prospect of taking over the lucrative businesses (such as McDonald’s or IKEA) abandoned by Western corporations.
In addition, Russia’s war economy, cut off from Western supply chains, led to a massive re-industrialization drive. That effort overcompensated for the severe loss of imported intermediate goods and the associated price hikes.
China’s resilience has been even more of a disappointment to Washington policymakers who believed that Biden’s CHIPS and Science Act, which banned anyone (not just Americans) from selling advanced semiconductors to Chinese companies, would decisively blunt China’s Big Tech firms and help the US win Cold War II. Huawei, for example, deployed superior software to squeeze more computing power out of smaller microchips, while it and other domestic chipmakers played catch-up on the hardware side. Meanwhile, the flood of low-cost and technologically superior electric vehicles and green-energy equipment caught American and European authorities off guard.
Perhaps the greatest blow to the confidence of Western elites came after the imposition of sanctions, as they struggled to convince their populations that re-shoring was happening and manufacturing was back. Only then did it dawn on them that 30 years of domestic disinvestment, both in manufacturing and in their states’ ability to get things done, had left the West impotent. Wherever we look — whether the US, the United Kingdom, or the European Union — we find states lacking the expertise they once had to build things; from Britain’s railways and America’s nuclear submarine program to green energy, public health, and much else.
The contrast with developments in Russia and China thus weighs heavily on Western policymakers, who for decades have been lured by corporate lobbyists and allied think tanks into depleting their states’ capacity to do what needs to be done. Whether this bitter realization persuades them to jettison the three myths that have blinkered them for so long remains to be seen.
Yanis Varoufakis
A former finance minister of Greece, he is leader of the MERA25 party and Professor of Economics at the University of Athens.
Copyright: Project Syndicate, 2024.
www.project-syndicate.org
