(Curiosity) Understanding the World Since the Cold War

Much of the angst in the English-speaking world, from Trump to Brexit and everything in between, comes from the disillusionment that inevitably follows a spate of unwarranted optimism. “Irrational exuberance,” to quote Alan Greenspan’s famous phrase, has come to define the early 21st century, by which I mean the world since 1989.

For those who don’t know, historians generally divide the modern era into a “long 19th century,” stretching from the French Revolution to the end of WWI (1789-1917), and a “short 20th century,” from the Russian Revolution to the fall of the Berlin Wall (1917-1989). Everything since has, historically speaking, been the 21st century, regardless of chronology.

The end of the Cold War was a big deal. A really big deal. It purportedly brought to a close roughly a thousand years of absolutely brutal intra-European conflict that, thanks to the post-Columbian conquests, eventually spread round the globe. I say purportedly because we can only view history from the moving platform of the present, which continually changes our point of view.

More importantly, the collapse of the Cold War ended the simmering stalemate that had governed international relations since 1945. Policymakers in the 20th century were petrified of change — see the “domino theory” — for fear that it would tip the balance of power in the wrong direction. The United States and her allies propped up numerous failing dictators simply to prevent those countries from having a historical moment that might go the wrong way, as it arguably did in Iran in 1979.

The historical 21st century started when the balance of power — that simmering stalemate I mentioned — suddenly shifted. Within months of the collapse of the Soviet Union, Iraq invaded Kuwait, proving that the desire for conquest had never abated. It had simply been squelched.

Markets previously kept behind the Iron Curtain were suddenly opened. The globalized economy exploded, fed by the internet and an almost religious belief in deregulation. Smart people everywhere — particularly in the 90s — had a sense that humanity had turned a corner, that we’d narrowly avoided thermonuclear holocaust and were on a path to… well, if not utopia, at least something better than had ever existed before.

The smartest people in the world believed that. You saw it reflected in book titles, which reveal the latest intellectual fads. A spate appeared declaring the “end” of everything: Francis Fukuyama’s “The End of History and the Last Man,” John Horgan’s “The End of Science,” at the same time that economists declared a New Economy.

(“The End of…” was as popular a book title in the 90s as “The Girl…” is now — The Girl on the Train, The Girl with All the Gifts, Gone Girl, etc., which suggests a different cultural fixation.)

“Capitalism” seemed the natural choice after communism. In truth, as Thomas Piketty has shown, capitalism had always served the elite over society, which is how oligarchs seized power in Russia almost immediately. But in the aftermath of the Second World War, when most of the world’s major economies were being rebuilt, the unusually high rate of economic growth temporarily outmatched the rate of return on capital, making it seem like capitalism could benefit everyone.

That anomaly ended with the collapse of the New Deal consensus (circa 1968-1973), when democratic capitalism failed and was replaced with corporate cronyism. From that time to our own, the rate of return on capital once again exceeded the rate of economic growth, as it had before the war, and unprecedented wealth began to accumulate.

The repeal of market protections in the 1980s and ’90s permitted higher risk/reward, but only at the cost of repeated banking crises, which were virtually unknown under the Bretton Woods system. A de facto corporate welfare system has emerged where the public underwrites the risk of catastrophic failure (in the form of bailouts, real or expected), which is the socialization of debt without profit. All wealth accumulated before the crash remains private, while the cost of the risk is born by the public.

This is the era of “cream-skimming.” Although productivity has increased almost 250% since the early 1970s, real wages have been almost completely stagnant, meaning workers have not shared in the increased efficacy of their labor, which they did in the years 1948-1973. As a result, the middle class has been inexorably shrinking and a new aristocracy has emerged. To the degree power follows money, this lopsided distribution has sapped governments of the desire to enact any legislation that may upset the current system.

But it was the opening of the former Eastern Bloc, along with huge emerging economies in India, Brazil, and China, at precisely the moment of crisis that gave the engines of capitalism enough virgin territory to forestall the failings at its heart. Globalism, enabled significantly by the internet, was sold as the cure to our economic woes — because it had to be. Nothing but the opening of new markets could feed the Ponzi scheme of unending economic growth.

Of course, the application of the consumption-growth model to all the lands of the earth has hastened economic decay at the same time that the enabling technologies — the seemingly benign smart phone — has fueled the automated mass invasion of privacy: an organized conquest, carried out with the tacit approval of world governments, who were never very fond of the idea.

With the Iron Curtain lifted, people were freed to move across borders in numbers never before contemplated. Since the 1990s, the United States has let in an average of one million people per year through legal migration, the largest by far of any period of this country’s history, eclipsing the previous boom years of 1880-1920. The resulting increase in labor supply has helped keep wages low and fueled a resurgence of white nationalism.

Democracy itself is on the wane, felt acutely here in the U.S. — from the clinical gerrymandering of the ’90s to the Patriot Act, the Supreme Court’s Citizens United decision, and the Cambridge Analytica scandal — but also globally in, for example, the uncertain accomplishments of the Arab Spring, which reversed the 20-year revolutionary trend toward democracy seen since the collapse of the Soviet Union.

Despite all this, as scholar Steven Pinker notes, on almost any objective measure — real income, life expectancy, infant mortality, literacy rate, violent deaths per 1,000 people — we’re still doing better than other eras in human history, which is true.

And yet, the recent trend is down. The question is whether that is simply the result of a false comparison to the post-war anomaly and the current system can survive, with ups and downs, until the decline in population growth puts a hard stop to the perpetual-growth model at the end of this century, or whether we’re witnessing the beginning of an immediate erosion.

People seem to reflexively choose the latter. Pessimism is the consumers’ choice. It’s cheap. It demands nothing of you, since all effort is waste. Optimism is more expensive, but it also accomplishes more. You’ll never even attempt what you believe is impossible.

Problems are soluble, but only if we engage them. Unfortunately, we humans rarely do so ahead of a crisis. But then, we are at our best when things are worst.

 


On four possible causes of our historical moment: