The paradox of discontent over current world order

Watching media the other day (Al-Jazeera this time) reminded me again the dissatisfaction people might have with our current world order, specially with the global economic system. In this particular segment focusing on the current refugee issue in Bangladesh, Dr. Muhammad Yunus proclaimed that the current capitalist system has installed a ticking time bomb, and if we do not clean up our act, this can be fatal. The segment was followed by the anchor discussing certain aspects of the current feminist movements. One of the female guests on the show denounced the roles of capitalism in holding back women in modern society.

In all fairness, the rise of nativism and anti-globalist sentiment in different western democracies does exemplify all the frustrations people may nurture over the current systems. It is almost a year since Donald Trump won the presidency of the United States (though not by popular vote) riding on a campaign, which linked globalization, open market and immigration with the broken American Dreams. Even earlier, British citizens voted to move out from common European markets as well as political system. The anti-globalist inward-looking political parties had their says in elections in almost all European national elections this year.

The newly empowered leaders had praised and allied with brutal autocrats in other countries as well. The current US president has been reported by The Guardian congratulating Rodrigo Duerte, almost an autocratic president of the Philippines, for "doing a great job". According to Freedom House report of 2017, the political freedom globally is on the decline for 11 consecutive years, as of 2016, so all the examples I have cited are not mere anecdotes.

Now, it is paradoxical because over the last 40 years, the world has experienced a level of social development and human welfare which is possibly unprecedented in our history. Extreme poverty declined from two billion people in 1990 to 705 million in 2015, a 137 thousand decline every day. Readers should check out ourworldindata.org for this and other fascinating statistics that exemplify the amazing feat of human civilization process. We have been saving far more children before their fifth birthdays and mothers giving birth compared to any other time in history. Even on the environment front, which puts a blemish on the civilization process, especially since the Industrial Revolution, about one-fifth of our electricity comes now from renewable sources according to UNEP.

But people, or I should say the median voters, are still extremely disenchanted by the global capitalist system based on the perception that it has not been fair to them. This can be true. We can again take the example of the US and ascension of President Trump. One of his clarion calls was US-Mexican immigration issue and building up a border wall. This is despite the fact net immigration between Mexico and the US has been below zero lately, meaning more Mexicans are leaving the US than coming in. Repeat-entry offenders have also gone down successively for the last five years, not to mention taking jobs that other Americans are not interested in. Some conservative states such as South Carolina have opposed harder immigration policies because of the demand for such labour in local economy, especially in agriculture. So it is certainly true that people have such anti-globalist perception, but, more often than never, it is not based on reality.

I was not entirely satisfied with all the examples. If people are really unhappy with capitalist economic system, it should show up in data. I am an empirical economist after all, and I should know better. So, I devised my own experiment based on observational data. I need not even show any causal relationship, just to see if capitalist systems are generally associated with unhappier people. One challenge is to define capitalism, partly because I do not understand it very well and it comes in so many different flavours. I just looked for the core tenets that critics of such systems usually associate with. They are generally open trades, open financial systems and personal property rights as well as more limited role of the public sector.

Luckily, Heritage Foundation, a conservative think tank in the US, estimates an "Economic Freedom Index" for different countries, which, for all practical purposes can be dubbed capitalism index! Happiness Index can be found from the World Happiness Report published by the UN Sustainable Development Solutions Network (SDSN). Since average happiness can be misleading, I have also looked at distribution of happiness for each country. Interestingly, on average, the average citizen is happier in countries with more capitalism (or economic freedom, the figure on the left). Even more remarkable is the fact that there is a slight negative relationship between the distributions of happiness and capitalist system of a country (see the figure on the right). These relationships stand even after I have factored in political freedom, redistributive efforts through taxation, stock of migrants in a country and income distribution.

What is going on then? The discontent with global capitalism and a country's participation in this arrangement has to come from some level of unhappiness that should have revealed themselves in those charts. But they do not. It is indeed paradoxical and I do not have an answer. I actually posed this question to a colleague of mine at Dhaka University and she had an interesting perspective. It is possible that anti-globalist groups are actually more organized minorities and find it easier to impose their political positions as a whole. There is also nativism as a cultural movement fueled by immigration (think Brexit). There are definitely economic anxieties emanating from greater automation of the production process (apparently South Korea, an epitome of global capitalism, has recently introduced "Robot Tax") and rising within-country inequality especially because of the top earners (possibly resulting from superstar rent as suggested by the late Chicago economist Sherwin Rosen, think "Facebook").

In any case, I do not think we have a good grasp of the history we are living through right now. Perhaps it is psychological. The idea of "End of History", be it Marxist or Fukuyama-ist, is perhaps too incongruent with the complacency offered by such system. How on earth can we explain a decline in belief in democracy being essential among the Swedish millennials compared to the older generations from above 75 per cent to about 50 per cent, according a paper by Mounk and Foa published recently in the Journal of Democracy? Or, maybe, it has some cultish zeal. We always need grander narrative to coerce cooperation and socialization as Yuval Hariri argues in his blockbuster book, Sapiens. Be that as it may, in this current state of collective confusion, relying on objective data to see that the world is not as bad it seems can give us all some respite and I hope readers can see through all the noises and acquire a glimpse of hope.

Dr Atonu Rabbani is Associate Professor, Department of Economics,

University of Dhaka. [email protected]