RESIGNATION

At the end, the Tory Prime Minister had no choice but to resign in disgrace. The government’s humiliating defeats in parliament were the result of a rift between its traditional clientele in the countryside and a burgeoning urban segment. In the end, party members advocating  free trade could no longer support the government’s position.

The year was 1846, and Robert Peel left Downing Street defeated. With the Tory government fallen, parliament repealed the Corn Laws, removing agricultural tariffs that had protected the gentry. As a result, Peel’s party would remain on opposition benches for a generation, marginalised by a Liberal surge led by William Gladstone.

DECLINE AND FALL

Once again, the Tories are tearing themselves apart in a battle between an open outlook and a closed worldview–this time on the EU.

And they are not alone.

The European Parliamentary elections of May 2019 proved that traditional “left” and “right” parties are faltering. The Christian Democratic EPP group lost more than five percent of their seats in Strasbourg and so did the Social Democratic S&D alliance.

The speed of the left/right collapse makes it difficult to blame the phenomenon on the gradual erosion of traditional voter segments such as Christian churchgoers and unionised workers.

We are witnessing a once-in-a-century political realignment, a shift by ninety degrees. The “left” vs “right” debate is being replaced by a different debate: “open” vs “closed”.

Like a widening Pacman mouth, “open” and “closed” parties are eating their way into parliaments previously dominated by “left” and “right” political forces. This is particularly impressive when looking at the gains and losses of the factions of the EU Parliament.

About half of the seats lost by EPP and S&D went to parties with a predominantly “open” outlook both on trade and immigration such as liberal ALDE and ecological Greens. The other half was gobbled up by those preferring a “closed” model: nationalists and populists.

What is “open” and “closed”, exactly, and how are they different from “left” vs “right”?

WHAT CONSERVATIVES “CONSERVE”

Conservative parties were founded to maintain (ie ‘conserve’) the economic privileges of the upper class. Low taxes and free-market principles put no restrictions on capital accumulation. Open markets, such as those enabled by the repeal of the Corn Laws that brought down Robert Peel, allowed capitalists to capture economies of scale.

The problem was that conservatism couldn’t win on upper class votes alone. This led to a second segment of voters: social conservatives. The common denominator between economic and social conservatism is reliance on authority: bosses and factory owners had to be obeyed in the economic sphere in the same way that priests and politicians had to be followed in the social sphere.

In return, social conservatism allows ordinary people to feel “special” despite a lack of wealth, as long as they are born in the “right” nation, pray to the “right” god, and vote for the “right” (ie conservative) party.  Conservative identity politics rely on closed national borders since the “purity” of national identity and its traditions shall be upheld.

As a result, conservatism and its preaching of subservience to authorities led to free markets but an unfree society.

PUTTING THE SOCIAL INTO SOCIETY

The founding principle of socialism, on the other hand, is defiance. Its origins were labour movements that organised against capital owners. Only together could workers defy their masters to achieve fairer distribution of economic gains. Socialists pressed for higher wages through unions and introduced state-sponsored benefits for the working class, funded by taxes on corporations and the wealthy. Trade barriers were erected to ward off foreign competitors that achieved “unfair” advantages by paying lower wages.

An interesting twist of socialism was to think from a global perspective. Marx and Engels found that the UK labourers they studied were being exploited in the same manner as the German ones they had encountered while growing up across the Channel. Only a global alliance of the “proletariat” was deemed sufficiently powerful to stand up to capitalists, regardless of the labourers’ creed, colour or country of origin. Thus the socialist anthem was born: “The Internationale”

One may argue that socialism lost the plot when corporations globalised but unions remained stuck in national silos.

LEFT VS RIGHT: THE BATTLEFIELD

In summary, the political “right” prefers an “open” (ie non-restrictive) approach on economic issues, while advocating “closed” (ie restrictive) positions on political and social issues. The common thread is authority: strengthening the economic authority of capital owners, the political authority of the state and the social authority of the church. By reinforcing established authorities, conservatives aim to conserve the status quo.

It is vice versa for the “left”: the goal is to defy the authority of capital owners by deploying the regulatory and redistributive power of the state, while keeping its political power in check and freeing society from the grip of the church’s authority. This is the reason that socialism advocates “closed” (ie restrictive) positions on economic issues while putting forward an “open” (ie liberal) agenda on political and social topics.

BREAKING THE WALL

Distinctions between “left” and “right” began to blur in the 1990s, when communism had collapsed and a string of electoral defeats had convinced a critical mass of politicians on the left that socialism was neither feasible nor sufficient to win votes.

The root cause of this insight was globalisation–the ability of entreprises to deploy capital across the globe. Global value chains reshuffled, shifting mass production to China and office services to India. The wages of Western factory and office workers came under pressure, angering the core clientele of the left.

Instead of trying to stop globalisation, however, the parties of the left such as U.S. Democrats, UK Labour or Germany’s SPD recognised it as unavoidable, or even a driven force for greater economic integration and hence, peace.

Their argument was boosted when Western economies didn’t crash despite the resurgence of Asia and much of Eastern Europe. Lost manufacturing output was supplanted by services. Simple ones (such as fast-food chains) kept less educated workers in employment while complex ones (eg finance, IT, consulting) boosted middle-class incomes.

The 1990s economic boom, driven by the intertwining forces o globalisation and technology, encouraged the likes of Clinton, Blair and Schroeder to embrace the so-called “third way”–a combination of open positions not just on social issues but also on economic ones.

It was the birth of the “open model”.

DETOXIFICATION

Kept out of office by a refashioned left for much of the 1990s, the early 2000s was a time when the penny dropped on the traditional “right”. Its economic policies of lower taxes, fewer regulations and free trade had been successfully co-opted, leaving conservatives with a host of archaic social policies as their sole distinctive feature.

On their road back to power, the UK Tories, French Gaullists and German Christian Democrats attempted to shed their backwards image by embracing environmental protection, disarmament, gay marriage and, crucially, immigration.

While highly qualified foreign workers boosted city economies in London, Paris, Berlin and elsewhere, suburban and rural areas also saw an influx of lower skilled immigrants, putting pressure on the wages of cleaners, waiters and bartenders.

Once again, it was mostly capital owners that benefited from the fact that both the “left” and the “right” had adopted essentially the same (open) model. By the mid-to-late 2000s, when Angela Merkel and David Cameron took power, their parties had become nearly indistinguishable from their social democratic rivals–both had embraced the open model.

POPULISM

The relative decline of traditional working-class segments allowed populists to sweep the low-income segment, which was losing faith in the left to protect wages and in the right to protect national identities.

Similar to 1930s national socialism, populists adopted a programme that combined conservative and socialist elements: closed borders to protect from immigration as well as from an erosion of traditional values coupled with a rejection of globalisation and free trade to prevent wages from going down further. Its philosophical simplicity proved popular in particular with older, less educated voters.

For the first time, the open model had serious competition–not from a resurgent traditional “left” or resurrected “right” but from its fundamental opposite–the “closed” model.

For lack of a positive vision for the future, populists offer return to a past that many of its older adherents perceive as “glorious”: good old conveyor belt jobs paying a decent wage, toilets clearly labelled for either men or women and less brown faces in the streets.

It is particularly revealing that populism seems to attract voters in European countries affected by some sort of imperial decline–the U.S., Britain, France, Germany, Italy, Hungary, Russia… This is particularly ironic since the former greatness of those nations had been the very cause of their earlier embrace of the “open” model.

NEW FAULTLINES

Today the open model remains the preferred choice of a new generation of voters having enjoyed higher education and exposure to various countries and lifestyles. It offers them a global network of opportunities that would never have been available without open borders and open markets.

The arrival of digitisation reinforces this trend with a crucial twist. Suddenly, skill means as much as capital. Globalised almost from day one, Silicon Valley garage firms devoured entire global categories: retail (amazon), TV (netflix), advertising (google), phones (apple), transport (uber), hospitality (airbnb), news (facebook). Next could be banks (bitcoin/libra), insurance (lemonade) and health (calico).

Digitisation breeds a new voter segment, which wants no part of the conservative values of the captains of industry it swept away. The economic battle turned from “the haves vs the have-nots” to “the know-hows vs the no-clues”. Age, population density and education become the new decisive markers in the battle of open vs closed, replacing social class as the decisive factor of how one might vote.

NINETY DEGREE SHIFT

As a result, conservative and socialist voter camps are realigning in a ninety-degree shift of the political spectrum. It is no longer just the “blue corner” (conservatives and christian democrats) vs the “red corner” (socialists and social democrats). It is now the “orange corner” (open model) vs the “violet corner” (closed model).

The open model is intellectually driven by a new generation of well-educated, younger workers and students that  intuitively understand the works of their contemporary, Yuval Noah Harari, who proved that markers like nation or religion are nothing but imaginary entities.

The closed model is living off displaced factory and office workers who have nothing left to cling to but a shared delusion of threatened  national and religious identity driven by nostalgia for days of lore.

The open model stands for open borders, open markets, innovation, free trade, tolerance and an international outlook.

The closed model stands for closed borders, closed minds, trade wars, nativism, religious zealousness, intolerance and bigotry.

Today it’s about having a free society and a free economy versus a restricted society and a restricted economy.

Times may be confusing for voters that are mentally stuck in left-right rigidity. For avowed conservatives it’s hard to imagine how free-market economics mix with open borders for immigrants, although this is a much more consistent philosophy from the one they hold. For old-line socialists, it’s difficult to accept that a more tolerant society is not ushered in by a redistributive nanny state, but by global innovation.

Politicians like Merkel, Macron or Rutte have confused mentally rigid voters by refusing to adhere to traditional left-right dichotomy, when in fact their political philosophy is much more clear-cut than either the left or the right. They are living the open model, and their success is based on implementing it effectively.

ENDGAME

Who will win the epic battle that saw the 2016 populist victories of Trump and Brexit but also the 2017 counter-revolution of Macron and Rutte? The answer lies in the crucial factor of productivity.

The post-financial crisis period from 2008 to 2016 was marked by the worst productivity growth since the 1800s with stagnant wages that allowed populism to prosper. Gross fixed capital formation fell to all- time lows, putting a brake on economic development.

However, productivity growth picked up again across the EU since 2017 driven by innovation and a renewed propensity to invest, with Brexit-haunted UK being a notable exception. The question is how much of the population will partake in the upswing.

The ultimate victory of the open model might come from its grasp of the twin engines of prosperity: globalisation and digitisation. Just as capitalism swept the world after the onset of the industrial revolution, the economic forces of today are bound to conquer region after region, leaving those covered by the dust of oblivion who fail to adopt it.

 

THE FUTURE IS OPEN

Optimists point to the 2020 as the moment to defeat the closed model at U.S. ballots by ousting a disgraced Donald Trump and potentially even roll back Brexit.

2020 also happens to be the Chinese Year of the Rat—a plucky, nimble animal that has a knack for finding its way into enclosed spaces.

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