24 November 2022

A World of Insecurity

Pranab Bardhan
2022, Harvard University Press, 240 pages,
ISBN 9780674259843

Reviewer: Christine Shields, Shields Economics

An accessible book, challenging but with impressive and topical examples, Bardhan examines the roots of world insecurity. Patterns vary by country – Trump supporters in the US tend to be older, rural and less educated, while Modi backers in India are educated and aspirational youngsters. The common thread is the search for comfortable tradition as each group sees it. A usual cause of insecurity is that the share of national income going to labour has been falling for almost twenty years, exacerbated by automation, AI and digitalisation, especially as large corporations crowd out smaller independents that are arguably closer to the people. Given these differences, it is hardly surprising that the best possible policy responses are not uniform. Overall though, policy everywhere needs to respect the rationale of their supporters and to seek a solution that provides cultural comfort in whatever form that may take.

This current populist wave is deemed a threat to democracy – especially where leaders eschew the democratic process by alleging their victory was stolen (Trump, Bolsonaro). Basically each populist upheaval weakens established centrist parties. Yet only about a third of the world’s population currently lives in a democracy. Two thirds have authoritarian governments, increasingly so in countries like China under Xi. Even Turkey is heading in that direction, while Russia is tipping into grounds frighteningly akin to Stalin’s rule. So the global trend is towards authoritarianism, not away from it. Sadly, this is true even within Europe – take Orban in Hungary. And with this authoritarianism comes repression of minorities – Uighurs and Tibetans by the Han Chinese or Kurds in Turkey and many more. But while decision making in authoritarian regimes may be faster than in democracies, the latter probably reflect greater consensus. In either case, much depends on the capacity of the state and its government to deliver. Here India stands out as being less able. And possibly Xi’s selection of his new Politburo full of loyalists may in time push China into that category.
While Covid may have intensified economic challenges everywhere, as well as exposing health and welfare shortcomings, the pandemic has created an openness to social harmony that arguably was not previously overt. The challenge of climate change adds another layer of collective self-interest – hence the overwhelming welcome afforded to newly re-elected President Lula by global leaders fearing Amazonian destruction. However, the pandemic has also highlighted the greater challenges faced by lower income countries where insecurity and uncertainty are even more heightened than in the West. Corruption augments that contrast.

Social media is seen as playing a toxic role in the current debate, exacerbating polarisation. This may be against liberal affluence or against immigrants, rather than just right versus left. But a common thread is the wish to ‘take back control’ from wherever it currently is perceived to rest. This may be bottom-up, down to local levels or just nationalist exclusivity. Key here is skill – highly skilled entrants may be welcomed especially if they embrace local mores, whereas unskilled, isolationist migration is seen as running counter to cultural diversity.

An interesting discussion on the inefficiencies of the Chinese model is illuminating, especially in the light of China’s ongoing handling of the pandemic. Incentives are few to encourage bureaucratic honesty in the delivery of bad news. This is an interesting area given Xi’s current takeover of China’s government. His seizing of individual power may well be seen as a step too far and – with luck – could limit his ‘reign’ extension to just one extra term – though his appointment of personal loyalists rather than competent lieutenants does not bode well so far.

Also notable are the parallels to evangelism – again citing Brazil and the US. In both cases, key is the strength of domestic institutions and their ability to achieve the necessary checks and balances. This was encouraging in Trump’s four-year term, and even more so since given the legal processes against him currently under way. Quite how Elon Musk’s newly reorganized Twitter handles the ex-president may well prove a game changer for the US political outlook.

What matters is the strength and cohesion of civil society – somewhat lacking in 2022 USA. In this corporate behaviour is as important as individual actions. Here perhaps the energy companies may prove a case in point. When non-energy firms, households and governments are so badly squeezed by rising costs and falling real incomes, it is incredibly hard to support the excess profits being made by some of the energy giants.

And for the developing world, key is the difference between the formal and informal economy. The latter is much harder to engage or regulate, and typically its players are relatively disadvantaged. Parallels could be drawn here to the gig economy in the West. There is a clear global need to maintain an adequate safety net but that has to be financed and allocated, a particular political challenge. An interesting comparison here is the Nordic region with its high tax, generous welfare, consensus model and the more aggressive capitalism of the US where inequality is much worse. To redress this, the pros and cons of a universal basic income as explored at length, concluding that the key challenge is implementation.

Yet reforms are clearly welcome in many areas. Compromises need to be sought rather than confrontation. And conspiracy should be avoided at all costs, though collaboration such as occurred with regard to the Covid vaccines is to be welcomed.

So no way is the world a perfect place. Exploitation must be opposed at all levels. Everyone should be entitled to basic standards of welfare, income and security whether they are in lower or higher income countries. A race to the bottom is the last thing anyone wants or needs. But how to get there? Sadly Bardhan has no easy answers. But why should he? Who has? This said, the book is a good read.