Liberalism in Retreat

The liberal international order has always depended on the idea of progress. Since 1945, Western policymakers have believed that open markets, democracy, and individual human rights would gradually spread across the entire globe. Today, such hopes seem naive. 

In Asia, the rise of China threatens to challenge U.S. military and economic hegemony, as Beijing seeks to draw American allies such as the Philippines and Thailand into its political orbit. In the Middle East, the United States and its European allies have failed to guide the region toward a more liberal and peaceful future in the wake of the Arab Spring and have proved powerless to halt the conflict in Syria. Russia’s geopolitical influence has reached heights unseen since the Cold War, as the country attempts to roll back liberal advances on its periphery.

But the more important threats to the order are internal. For over 50 years, the European Union has seemed to represent the advance guard of a new liberalism in which nations pool sovereignty and cooperate ever more closely with one another. But today, as it reels from one crisis to the next, the EU has stopped expanding. After the British vote to leave the bloc last June, it will probably shrink for the first time in its history.

Across the ocean, the U.S. commitment to global leadership, which until now has sustained the order through good times and bad, looks weaker than at any point since World War II. The Republican president-elect Donald Trump ran on an explicitly “America First” platform, pledged to renegotiate U.S. trade deals, praised Russian President Vladimir Putin, and called into question U.S. commitments to NATO. Meanwhile, President Barack Obama’s “rebalance” to Asia has struggled to take off. Beijing has wasted no time in laying out its own vision for a more integrated Eurasia that may exclude the United States and in which China will play the leading role.

Over the past half century, as other political systems have crumbled, the liberal international order has risen to face its challenges. Yet so long as the economies of its leading members remain fragile and their political institutions divided, the order that they have championed is unlikely to regain the political momentum that helped democracy spread across the globe. Instead, it will evolve into a less ambitious project: a liberal international economic order that encompasses states with diverse domestic political systems. In the short term, this will allow democracies and their illiberal counterparts to find ways to coexist. In the longer term, providing it can adapt, liberal democracy is likely to regain its supremacy.

LIBERALISM ON TOP

In the aftermath of World War II, Western policymakers, especially in the United States and the United Kingdom, set out to build a global system that would ensure that they would never repeat the disastrous failures of international cooperation of the interwar period. The architects of the system sought to promote not just economic development and individual fulfillment but also world peace. The best hope for that, they contended, lay in free markets, individual rights, the rule of law, and elected governments, which would be checked by independent judiciaries, free presses, and vibrant civil societies.

Over the past half century, as other political systems have crumbled, the liberal international order has risen to face its challenges.

At the heart of the order were the Bretton Woods institutions—the International Monetary Fund and the World Bank—and the General Agreement on Tariffs and Trade, which became the World Trade Organization in 1995. Underpinning all these institutions was the belief that open and transparent markets with minimal government intervention—the so-called Washington consensus—would lay the foundation for economic growth. Guided by these principles, U.S. economic, military, and diplomatic support helped Germany and the other nations of Western Europe, as well as Japan, recover from the destruction of World War II.

Western policymakers were confident that transitions to open markets would inevitably lead to the spread of democracy. On many occasions, they were proved right. Liberal democracy has gradually expanded across Europe, Asia, Latin America, and sub-Saharan Africa, especially since the end of the Cold War. According to the U.S. nonprofit Freedom House, the number of democratic governments increased from 44 in 1997 to 86 in 2015, accounting for about 68 percent of global GDP and 40 percent of the world’s population. 

As the order expanded, a new liberal idea gained ground: that governments that mistreat their populations and foment instability in their neighborhoods forfeit their sovereign right to rule. The International Criminal Court, which encroaches on sovereignty in the name of justice, was established in 1998. One year later, British Prime Minister Tony Blair laid out his doctrine of liberal interventionism in Chicago, declaring that, in a world of growing interdependence, “the principle of non-interference must be qualified in some important respects.” In 2005, the UN General Assembly endorsed the “responsibility to protect,” the concept that when a state fails to prevent atrocities, foreign governments can intervene to do so. In an ascendant liberal international order, the fundamental Westphalian principle that sovereign governments have the right to control their internal affairs—the principle that underlies international law and the UN—increasingly depended on governments’ adhering to Western standards of human rights. The liberal order seemed to be setting the rules for the entire international community. 

THINGS FALL APART

But over the past decade, buffeted by financial crises, populist insurgencies, and the resurgence of authoritarian powers, the liberal international order has stumbled. According to the political scientist Larry Diamond, since 2006, the world has entered a “democratic recession”: the spread of individual freedom and democracy has come to a halt, if not retreated.

The greatest danger comes from within. The system’s leading powers are facing sustained domestic political and economic uncertainty. More than 25 years of stagnant median wages in the United States and parts of Europe have eroded the credibility of elites and the appeal of globalization. The opening up of economies to ever more trade, investment, and immigration has increased total national wealth, but it has not translated into local gains for large segments of society. The lax financial regulation that preceded the 2008 financial crisis and the bank bailouts that followed it have shattered people’s faith in government, and the Great Recession undermined their support for open capital markets, which seemed to benefit only a narrow global elite.

Trump’s victory, the decision by a majority of British voters to leave the EU, and the rise of populist parties in both the prosperous north and the poorer south of Europe represent visible symptoms of this deep unease with globalization. So, too, does the collapse in popular support in the United States and the EU for expanding international trade, whether through the Trans-Pacific Partnership in the United States or the Transatlantic Trade and Investment Partnership in Europe. In a 2014 Pew Research survey, 87 percent of respondents in developing economies agreed that trade benefits the economy, whereas around half of all respondents in France, Italy, and the United States said they believed that trade destroys jobs and lowers wages. 

Across Europe, resistance to deeper political integration has grown. For the past 60 years, the willingness of the EU’s member states to pool their sovereign power in supranational legal structures provided a benchmark for other countries that sought to cooperate more closely in their regions. As the political scientist Simon Serfaty put it in 2003, Europeans had transformed their systems of political governance from city-states to nation-states to member states. Now, this process has ground to a halt—and it may well reverse. 

The British vote to leave the EU will likely prove an outlier: the United Kingdom joined the European Economic Community, the EU’s predecessor, only in 1973, 16 years after its founding; the United Kingdom has a long history of Euroskepticism; and it opted out of the single currency and the Schengen area of open borders. Other countries will probably not follow the United Kingdom out of the EU. But few European leaders appear willing to continue relinquishing their countries’ sovereignty. Many European states have rejected EU requests that they accept a quota of refugees. The richer members of the eurozone are refusing to pool their financial resources in a common deposit insurance scheme to ensure the long-term viability of the single currency. Today, many European politicians are demanding more national sovereign control over the application of existing EU laws and the design of new forms of integration.

Few European leaders appear willing to continue relinquishing their countries’ sovereignty.

In this context, the hope that the EU might provide a template for liberal regional integration elsewhere seems increasingly lost. The Association of Southeast Asian Nations, South America’s Mercosur, the African Union, and the Gulf Cooperation Council remain mechanisms for only limited political and economic cooperation among governments. China and Russia, meanwhile, have used this period of Western self-doubt to modernize their militaries and assert their regional and geopolitical interests. They have built institutions, including the Eurasian Economic Union and the Shanghai Cooperation Organization, that have helped them coordinate and legitimize a parallel political order that challenges Western norms of democratic governance and that rejects any external interference in support of human rights. 

AMERICA IN RETREAT

For the past seven decades, the United States has provided the security umbrella under which the liberal international system has flourished. But today, the United States is more inward-looking than at any point since World War II. After the costly wars in Afghanistan and Iraq and the chaos that followed the intervention in Libya, Obama has recalibrated the United States’ international role, consistently encouraging allies in Europe and the Middle East to take greater responsibility for their own security. In his presidential campaign, Trump twisted this argument into an explicitly transactional bargain: the United States should become a mercenary superpower, protecting only those countries that pay, so that it can focus on making itself great again at home. In so doing, he ignored the hard-won lesson that investing in the security of U.S. allies is the best way to protect the United States’ own security and economic interests. How exactly Trump will govern, however, remains unclear. 

Rightly or wrongly, the United States’ allies, from Europe to Asia, now fear that the superpower may no longer be an engaged and committed partner. These fears come at a dangerous time. A Europe hobbled by institutional and economic weakness is more vulnerable to the diverse forms of pressure that Russia is currently applying, including financial support for European populist parties and threatening military maneuvers on NATO’s eastern borders. Despite Russia’s own economic weakness, Putin’s advocacy of a new European order based on cultural and national sovereignty appeals to Europe’s increasingly vocal nationalist parties, from the UK Independence Party to France’s National Front and Hungary’s Fidesz, whose leader, Hungarian Prime Minister Viktor Orban, has publicly advocated building an “illiberal state.”

Many of the United States’ other allies and democratic partners around the world are also on the back foot. Japan and South Korea are struggling to manage the twin challenges of aging populations and economies that are overly dependent on exports, and his-torical antagonisms prevent them from presenting a united front to promote liberal democracy in their region. Large emerging-market democracies, such as Brazil, India, Nigeria, and South Africa, have so far failed to overcome entrenched obstacles to sustainable economic growth and social cohesion. And the perception that U.S. global power is waning and that the Washington consensus does not guarantee economic progress has bolstered strongmen in countries as diverse as the Philippines, Thailand, and Turkey, who have undermined the institutional checks and balances that underpin liberal democracy.

POT, KETTLE

Of course, supporters of the liberal international order have long displayed an inconsistent commitment to its principles. The United States and its allies may have generally promoted respect for the rule of law and liberal governance within their borders, but the dominant objective outside them has been to protect Western security and economic interests, even if doing so damaged the credibility of the liberal international system.

The United States has often acted unilaterally or selectively obeyed the rules of the international order it promotes. It invaded Iraq under a contested legal mandate, and the U.S. Congress has refused to ratify the UN Convention on the Law of the Sea, among numerous other multilateral conventions and treaties. And in 2011, the British, French, and U.S. governments stretched their mandate—granted by UN Security Council Resolution 1973, which authorized all necessary measures to protect civilians in Libya—when they helped overthrow Libya’s leader, Muammar al-Qaddafi. And various Western governments have condemned Russia and Syrian President Bashar al-Assad for indiscriminately shelling civilians in Syria while simultaneously supporting Saudi Arabia’s bloody campaign in Yemen.

The United States’ allies, from Europe to Asia, now fear that the superpower may no longer be an engaged and committed partner.

Small wonder, then, that the West’s opponents have interpreted calls to enlarge the liberal international order as an excuse to expand Western political power. Putin sounded this theme in October, at the annual conference of the Valdai Discussion Club, when he accused the United States of promoting globalization and security “for itself, for the few, but not for all.” It is also unsurprising that the world’s principal multilateral institution, the UN Security Council, remains frozen in the same old standoffs, riven by disagreements between China and Russia, on the one hand, and France, the United Kingdom, and the United States, on the other. As a result, liberal attempts to reform the concept of state sovereignty, such as the introduction of the notion of the responsibility to protect and the establishment of the International Criminal Court, have failed to acquire international legitimacy—take, for instance, the ongoing failure to stem the violence in Syria and the announcements in October by the governments of Burundi, Gambia, and South Africa that they will withdraw from the court. Even the Internet, which promised to foster a more liberal international order by empowering individuals instead of governments, is now increasingly dominated by ideological polarization over national firewalls, surveillance methods, and privacy violations.

KEEPING ORDER

Do these challenges herald the end of the liberal international order? Probably not. Established liberal democracies remain resilient. Whatever domestic challenges they may face, from inequality to unemployment, they approach them from a position of strength compared with emerging-market countries, many of which boast high levels of GDP growth but have yet to make the transition from export- and investment-led growth to consumption- and innovation-driven growth. Western democracies are designed to allow the people to vent their frustrations and refresh their political leadership. Their economies operate in a relatively dynamic, transparent, and open manner, which fosters innovation. These qualities allow their political institutions to recover legitimacy and their economies to regain momentum. On the other hand, centrally controlled or illiberal countries, such as China and Russia, have yet to prove that their political systems will survive the economic transitions they are undertaking.

Still, liberal democracies cannot postpone difficult political decisions any longer. They need to fix themselves first if they are to sustain their liberal international order. They must boost productivity as well as wages, increase work-force participation even as new technologies eliminate old jobs, integrate immigrants while managing aging societies, and, in Europe’s case, evolve from centrally funded welfare states to more locally governed welfare societies, in which regions, cities, and other municipalities control a greater share of tax income and so can tailor the provision of social services to local needs. Liberal governments can rise to these challenges, whether by investing more in education, improving physical and digital infrastructure, or modernizing regulations that stifle entrepreneurship and growth in the service sector. These may seem like modest steps. But the appeal and, indeed, the survival of a liberal inter-national order depend on its ability to deliver returns to the societies within it that are superior to any alternative.

If the liberal world can get itself back on track, and does not itself turn to protectionism, it will likely find that the non-Western rising powers, China chief among them, will want to sustain the existing international economic order of relatively open markets and free flows of investment. After all, only through continued integration into the global supply chain of goods, services, people, and knowledge can emerging markets meet the aspirations of their growing middle classes. As the scholar G. John Ikenberry noted in his 2011 book, Liberal Leviathan, the United States and China—the two powers that will most likely determine the future of world order—may both refuse to compromise on their core principles of domestic governance and national security, but they can best coexist and prosper within a liberal international economic order.

It is in the West’s interests, therefore, that China’s economic development continue smoothly. U.S and European markets for goods, services, and infrastructure should remain open to Chinese foreign direct investment, as long as Chinese companies abide by U.S. and European rules on security and transparency and the protection of intellectual property. European countries should take the same approach with Russia, on the condition that Russian companies abide by EU rules. A mutual commitment to the liberal international economic order would help Western governments and their illiberal counterparts keep open other avenues for cooperation on shared challenges, such as terrorism and climate change, much as China and the United States have done over the past several years.

Western democracies are designed to allow the people to vent their frustrations and refresh their political leadership.

Meanwhile, European governments and businesses should take part in the Chinese-led effort to connect Northeast Asia with Europe across the Eurasian continent, a component of a series of regional infrastructure projects known as the Belt and Road Initiative. In 2016, the volume of global trade stagnated for the first quarter and then fell by 0.8 percent in the second. This reflects an ongoing structural decline in the growth rate of trade, as emerging markets, such as China, make more of their own products and developed countries bring some production back onshore. Against this backdrop, ramping up investment in infrastructure that can connect the thriving coastal areas of Asia to its underdeveloped hinterlands and then to Europe could create new opportunities for economic growth in both the liberal and the illiberal worlds. Rather than challenge such initiatives, the United States should support Western-led regional and multilateral financial institutions, such as the World Bank, the European Bank for Reconstruction and Development, and the Asian Development Bank, as they join forces with the Asian Infrastructure Investment Bank and the New Development Bank (set up by the BRICS countries—Brazil, Russia, India, China, and South Africa) to pursue projects that are in every country’s economic interest while adhering to environmentally and financially sustainable principles.

Similar cooperation will be harder to build with Russia. Russia’s system of centralized and opaque political and economic governance makes deeper integration incompatible with the EU’s market and rules-based system, and NATO members have begun a much-needed upgrading of their military readiness in the face of recent Russian provocations. EU and NATO tensions with Russia will likely persist, even if Trump’s election heralds a change in U.S.-Russian relations. Still, the Chinese initiative to build new ways of connecting the Eurasian economy could provide an alternative way for the United States and Europe to engage with Russia.

The countries that built the liberal international order are weaker today than they have been for three generations. They no longer serve as an example to others of the strength of liberal systems of economic and political governance. Autocratic governments may therefore try to establish an alternative political order, one governed by might rather than by international laws and rules.

But liberal policymakers would be wrong to urge their countries to hunker down or resort to containment. An extended standoff between supporters of a liberal international order and those who contest it may accidentally lead to outright conflict. A better approach would be for liberal countries to prepare themselves for a period of awkward coexistence with illiberal ones, cooperating on some occasions and competing on others. The international political world will remain divided between liberals and statists for the foreseeable future, but both sets of countries will depend on a liberal international economic order for their prosperity and internal security. Time will tell whose form of government is more resilient. If history is any guide, liberal democracy remains the best bet.