Us Vs. Them: The Failure of Globalism, with Ian Bremmer

Podcast music: Blindhead and Mick Lexington.

DEVIN STEWART: Hi, I'm Devin Stewart here at Carnegie Council in New York City, and today I'm speaking with Ian Bremmer. He is president of the Eurasia Group here in New York, and he's also author of a new book called Us Vs. Them: The Failure of Globalism. Ian, thanks for speaking with us.

IAN BREMMER: Sure. My pleasure.

DEVIN STEWART: "The failure of globalism." What is globalism, first of all?

IAN BREMMER: Globalism is an ideology that implies that bringing people closer together, opening borders, opening trade, and having the United States and others work together to ensure global stability are things that will make the world better, and so we should support them. Globalism was the underpinning ideology of the top 1 percent of elites both in the United States in the West and even to a degree in the world over the course of the past decades. That is what globalism is.

DEVIN STEWART: What are the signs that it failed? The ideology of globalism is related to liberalism, right? Was liberalism allied to begin with, or is it redeemable?

IAN BREMMER: Liberalism is allied. Of course, liberalism has a lot to do also with the notion that a government should have rule of law, freedom of speech, independent judiciary, and basic human rights. Those things have eroded in lockstep in some degree for the same reasons and in some degree not.

The failure of globalism is very different than the failure of globalization. I don't think globalization has failed. It has led to a lot more wealth. It has taken a lot of people out of poverty. It has brought the costs of goods down. It has created more efficiencies in the global marketplace. Globalization has done a lot of what globalization was supposed to do.

Globalism implied that that would work for societies, and that has not happened. It was cheerleading globalization, but to make globalization work for people inside societies, you have to ensure that if they don't benefit, if they are some of the losers of globalization—and there have been many—or if they are some of the losers of open borders and open immigration, or if they are some of the losers of wars around the world, to try to ensure stability or to promote liberalism, for example, they need to be taken care of. That has not happened.

We see that across the West. We see it increasingly in emerging markets as well. The average American—and certainly we're talking about a plurality of Americans; we might even be talking about a majority at this point—believe that free trade does not benefit them, that they lose. They believe that open borders and immigration in the way that the United States was founded does not benefit them. Certainly, they also believe that warfighting of the United States, being the global sheriff and trying to promote global order, does not benefit them. They have lost a lot of support for the American political system and its leaders as a consequence of that. It has created significant, durable, and almost unprecedented divides in U.S. society as a consequence of that. We are seeing a lot of this outside of the United States as well. We can talk about that.

That is the failure of globalism. That is the belief on the part of these people and the willingness to have that belief known and voted on, that the people in their societies that have promoted this idea that we are one world, we need to all work together, and we need closer and closer ties, is something they feel has been used to abuse them. They want it stopped.

DEVIN STEWART: Ian, this us-versus-them feeling or the phenomenon of this divide between us and them, which I would describe as being about the losers protecting themselves and the winners keeping the power, you are asserting in your book will "define our societies" more than the rise of China or the future of Europe. Why do you think it is so important? And what do you mean it will define our societies more than those other things?

IAN BREMMER: It's what we are paying attention to. There is no question that if you look at the United States today, the notion that all the values that Americans believe this country stood for are now open to question, so there is: "Who are we? What does America mean? What does the American system stand for? Do we believe in free markets? Do we believe in liberal democracy?" The average American increasingly says, "No, these systems and precepts don't work for us."

In the course of the last year, the media of course in the United States has been utterly dominated by the election of Donald Trump, either how wonderful he is and how he is going to make America great again or how he is the worst thing this country has ever seen and everything he does is abysmal. There has been very little effort and time spent on how it was that the American population could get to the point that we would elect someone like him as obviously outside the political establishment and unfit for political office, and uninterested in promoting core American values.

Despite all of the things that have happened in his administration in the last year that have blown the heads off of people that oppose him, his base has remained remarkably solid. They don't care because this was a protest vote, the likes of which Americans alive today have never seen before.

This is also happening across Europe. It happened in the United Kingdom with Brexit, a definitional, transformational vote for the future of the United Kingdom. It has happened in France, Germany, Italy, and Eastern Europe. We increasingly see this developing in nascent ways in other democracies around the world.

DEVIN STEWART: Right. Let's get to that. Your book is saying it's going to get even worse because at least the United States and Europe have the resources and institutions to cope with the anti-globalist populist backlash. That is not necessarily the case in developing countries or poorer countries.

In particular, you point to 12 countries you call the "fault lines" that are more vulnerable to any type of political backlash. What are those countries, why did you pick them, and what are the risks associated with those countries?

IAN BREMMER: First of all, that is exactly right. The danger is going to be more felt in terms of political stability in countries that are not in the developed world. Part of the danger in the United States or in the United Kingdom is that these countries are so strong, their governments are so strong, that you can allow unequal development and inequality to grow to a surprisingly high level without it really becoming urgent in any way. That implies that everyone is talking about how inequality is an issue and how we need to address it, but it doesn't really need to be addressed in the United States or Europe because people are not protesting and there is not a lot of violence. This is not the Arab Spring.

Even though we know that extraordinary wealth is being generated in the United States and Europe, we are not going to build infrastructure that will really change the lives of the average working or middle-class person. We're not fixing education or healthcare to make it more sustainable for the long term. The big tax cuts the Americans just put in place will need to be paid for at some point but are very unlikely to be on the back of the wealthy. It is much more likely to be cutbacks on subsidies that will further hurt these people. But it's not urgent again. It is a very sad thing that that is the case, but it does not lead to a sudden crisis, where in emerging markets around the world, countries like South Africa, Nigeria, Saudi Arabia, Brazil, and Mexico, you see similar challenges emerging but governments that have much less resilience and much less capacity to ensure that their institutions continue to function well.

In some cases, you have governments that are trying very hard suddenly to address these problems, like in Saudi Arabia where it's no longer going to be effectively as wealthy as an oil economy, so can they diversify and diversify fast, bring women in, and improve education? It is good that they're starting to do it. Is it too late?

In a country like Venezuela, there is no effort, and the country is falling apart really quickly. In a country like Brazil, there have been massive anti-corruption demonstrations.

All of these are really big problems. If you look at the role not just of globalization but, more importantly, technology is doing more to hollow out the middle and working classes now than anything that we have seen under globalization. It is the emerging markets that are going to face the much tougher time. They are the ones that were low-end manufacturing, and now they are moving into higher-end manufacturing, professional services, and white-collar jobs, and those are precisely the jobs—it is not the coders working for Facebook. It is the higher-level manufacturing types, it's the low-level services that are becoming automated and getting displaced by artificial intelligence (AI).

Just as these countries are starting to make it as middle-income countries facing middle classes that have much greater demands, their governments are becoming less capable of providing for them. They are the ones with social safety nets that don't function as well. They are the countries that if people suddenly are not able to continue to provide for themselves and their kids, we are talking real starvation. We are not talking just that they are not going to have upward trajectory, which would be the case in the United States or Europe.

DEVIN STEWART: Among those 12 countries, the big elephant in the room is China as well as Indonesia, two very interesting cases that you discuss in your book. Can you briefly talk about the particular stresses that China is facing in this realm?

IAN BREMMER: China is an exceptionally interesting case because on the one hand, China is clearly the country that has benefited the most from globalization over the past 40 years. They get in the World Trade Organization (WTO). They have all of this capacity inside the country to be low-end labor. They become the factory for the world.

Now suddenly their labor rates are getting closer to those of the developed economies. It is more expensive to produce there. They have moved towards robotics, or people move out of China. They move to cheaper places to produce, like Southeast Asia, Vietnam, Bangladesh, and the rest.

You could say, "Wow. China is going to fall apart," except the political system in China is consolidating and moving toward much more top-down control and less political reform, facilitated by state control of technology that allows them to determine who is punished and who gets benefits on the basis of how people behave. That is very different than the capacity of a developed country where the technology in that regard is really in the hands of the private sector just trying to make money off of citizens. In China, they are really trying to align stabilizing behavior.

The other point is that while it is true that the Chinese system is suddenly going to be on the wrong end of low-end inefficient labor when technology is much more cost-effective, the Chinese are also today the world's leaders in industrial robotics. They are not just producing those robots, but they are actually using them.

If people are not efficient in the United States or in India, they don't have jobs. It's not like the government is stepping out to employ them in large numbers. The Chinese system is actually the world leader because it's state capitalist at employing low-efficiency labor.

That is what China does. When there was a belief that China was going to become more free market, open up, and be driven more by the private sector, then creative destruction will tell you, "Well, if labor is not efficient, these people are all just going to be fired." But if China is doubling down on state-capitalist authoritarianism, then it is quite possible that China can take its wealth as a government and use it to ensure that all of these displaced people continue to have jobs and opportunities. So interestingly, the very threat that the failure of globalism is posing to China is also something that might perhaps make its anti-liberal, anti-globalist model more effective going forward.

DEVIN STEWART: You devote at least a chapter to examining those types of tools that governments have. You describe them cleverly as various types of walls. Of course, we know about "build the wall" and Trumpistan. What type of other walls do you foresee in the future?

Right now we are looking at a possible trade war between the United States and China. There have been some backroom negotiations that have postponed that for now. What do you see for the free trade system? Is free trade dead?

IAN BREMMER: Free trade is certainly taking a pretty big hit. Part of that is the technology shift. Before, you had automation becoming the biggest driver of manufacturing and trading wealth. If you wanted to produce something, you moved it wherever it was cheapest to produce. If that meant everything comes out of another country, that is fine.

Suddenly, a lot of money is coming back to the United States for investment because if labor is no longer a primary cost, then you want to produce where your consumers are. You also want to produce where you have rule of law and an independent judiciary that reduces the tail risk of governance going against you. I think that is one reason why globalization has turned.

The walls that we see being built right now are the walls that stop immigrants from moving across countries and the walls that make it harder to shift goods and services across countries. When Steve Bannon, the former chief strategist for Trump, was fired, there was a sigh of relief among globalists in the United States and internationally: "Okay, that was craziness. He was in the campaign, but he is gone now. Now we can go back to politics as usual. We are going to have billionaires and big industry advising Trump, and that will be fine."

The reality is that a year later, we have seen that Trump's basic message which resonated with much of his base —"We want to build a wall. We don't want all these people coming in. We want tariffs. We want you to protect our industry" —is something that Trump is talking more and more about. He has been pushed back, so the announcement on tariffs is very different than the actual implementation on tariffs. Still, this causes large amounts of speculation. Just the announcement on aluminum tariffs pushed up heavily the price of bauxite because people are speculating on the basis that it is going to be more challenging.

The announcement that you are going to have tariffs between the United States and China leads to talk of a trade war and makes countries hedge away from the United States to prepare other plans. Dangers around NAFTA, even if Trump sticks with NAFTA, push the peso up. All of these things are driving concerns that the politics of free trade are no longer attractive domestically, not in the United States, not in Europe, not in Asia, and not from the countries that benefit from it.

Immigration is the same point, of course. The idea that the Americans would be accepting all sorts of refugees, some of whom are incredibly talented, they don't lead to—first-generation refugees and immigrants in the United States have much lower criminality rates than those born in the United States, native-born Americans. It does not matter. The politics are such that it is absurd and self-defeating for any politician in America to say, "Yes, we are the beacon on the hill, and we are going to accept all of these people that come in, no matter what they look like."

In Germany, Merkel tried to say: "We are the ones that can handle this. We can take as many as you have," and it led to an enormous hit to her own personality and a much more challenging electoral cycle for Merkel as well.

I think that whether we are talking about physical walls, trade walls, or virtual walls facilitated by technology that is driving people farther apart and have people only reading about the things that they like and consuming information from people that they agree with and not from others, dividing societies—even neighborhood by neighborhood and apartment by apartment—that is becoming definitional to the way we think about citizens in the developed world today, and it is expanding beyond that.

DEVIN STEWART: My favorite part of your book, Ian, is where you look at the proper relationship between the individual and the state. You look at UN happiness studies where you find that the things that make people happy are caring, freedom, generosity, honesty, health, income, and good governance. I think you're getting at an age-old question, which is: How do you govern well? Are there good examples of governments that are applying that type of wisdom to the way they govern?

IAN BREMMER: There are, and of course there have been here in the United States. I would say that after World War II, America certainly felt that way; after the Depression with FDR and some of the Great Society projects America felt that way.

In America, the political system has become more sclerotic. It has been more captured by special interests both in the private sector and among narrow demographic and empowered groups in the United States, and even some outside the United States. That has made the U.S. system function less well on all of these happiness indicators that the United Nations and others talk about.

There are certainly countries that do it better. The Canadians today are smaller and more decentralized. It feels like it is better governed for the average Canadian than the average American does in the United States. The Scandinavians also feel that way. You look at a country like Bhutan, which is quite poor but does well on most happiness indicators, some of which they developed themselves, a country of all of a couple million people, most of whom feel like they have a direct connection to the king and the royal family.

There are plenty of places around the world that feel comparatively well governed. What we do is we lack leadership at large government levels in most places in the world today. That is certainly true among developed governments in a way that really was not true decades ago.

DEVIN STEWART: Before we go, Ian, just a couple more questions. Are there some takeaways from your book you can deliver to governments to do a better job?

IAN BREMMER: First of all, I don't think the fix here is going to come from big central governments. As much as I can say I would like the Trump administration to pass huge infrastructure bills, especially in this comparatively low interest rate environment still—I don't have as much of a problem blowing out the deficit when it is relatively cheap to get money as I would if we were on the other end and interest rates had been pushed up quite a bit; this was true under Obama as well, even more so—I would love to say let's invest a lot more in places that really could use that infrastructure. It would unlock a lot of talent in the United States and make more people capable of benefiting and taking advantage of a new economy where middle classes and working classes are hollowing out. That is not going to happen.

It can happen at the state level. It can happen at the city level. It can happen with CEOs of corporations acting as stewards not just for their employees but also for their bases of fans of their brand and direct consumers. I do indeed see some of those experiments starting to happen.

I think the reason you get optimistic about the future of the United States and the world is precisely because in an environment where central governments don't get it right but the problems get bigger, you do start to see individuals at local levels that have money, vision, and strategy making a difference. Some of those efforts will not come to much. Some of them won't be scalable. Some of them will fail. But of those that do succeed and are scalable, eventually central governments will pick them up.

I think we are in a time right now where this issue is becoming more known. It will get bigger. It will get worse before it gets better, but we are also starting to see grassroots responses. Ultimately, grassroots responses are the ones that are most sustainable. A big effort by the central government in the United States that could suddenly be overturned, like Obamacare, for example, with a new government coming in is not the way to necessarily address the biggest, most knotty long-term problems.

DEVIN STEWART: Final question comes from our senior fellow Nick Gvosdev, Ian. He had a request for us. Here is the question: "Is populism in the United States linked to support for American withdrawal or disengagement from the world? And is there a strategy of U.S. engagement that is actually compatible with U.S. populism?"

IAN BREMMER: I think it is linked to disengagement, particularly on the military front. That is because the average American has fought in wars for the United States in Afghanistan, Iraq, and Vietnam if you want to go back earlier.

These are relatively disenfranchised Americans. They are patriotic. They give more to the country and for the country than anybody else, yet they have fought in failed wars with missions that were poorly defined from day one. Many of them were killed. Far more were injured and suffered psychological disorders. Then they come back having their lives completely disrupted. Those are their families. Those are their communities. They are not heroes. They are not treated as such, and the Veteran's Administration is not there for them.

I think that having gone through that for decades now you have turned a large number of the most patriotic Americans that we have against the idea that the United States should be the world's sheriff, that we should be the ones upholding decency, human rights, and stability for other countries in the world, especially because the United States is comparatively stable. We are far away. We are in a geopolitical environment that we are not as directly threatened by refugees coming from Syria's civil wars and Yemen, Libya, and even from nuclear proliferation in North Korea.

I think the kind of engagement, to respond to Nick's point, that is more supported potentially by a more populist American population is more multilateralism. Now this is not something Trump personally supports, but the idea that we can do more if we work with our allies, that if we create more durable organizations that are truly multilateral, that others have a greater say in the decision making, but they also are spending an awful lot more, they are much more engaged in the input in terms of troops, cash, and the rest.

As the world moves past Pax Americana to something much more dangerous, something much more fraught, something that is not led as much just by America and our allies, where China plays a bigger role, and where others who are rogue actors play a bigger role, I think that the desire to have more multilateral solutions where the United States is a part will grow.

DEVIN STEWART: Ian Bremmer is author of the new book Us Vs. Them: The Failure of Globalism. Ian, thanks so much.

IAN BREMMER: My pleasure.