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There are horizontal periods – indeed some people, Thomas Friedman among them, believed some years ago that the world was definitively flat– and periods in which verticality imposes itself again. In many ways, we are once again moving from the horizontal to the vertical with, for example, borders where walls are being built and the renewed proliferation of weapons of mass destruction and long-range missiles. Verticality is also making itself felt in social terms. Social classes are back on the agenda, although not in the traditional Marxist sense of class struggle, but rather the decline of the middle classes and the emergence of the ‘precariat’. The social escalator has a vertical dimension, and is not working as in previous eras, despite renewed growth in many economies following the crisis.
Perhaps we are witnessing what Dennis J. Snower calls the ‘great decoupling’, which he labels ‘dangerous’, unlike its predecessor, which was ‘convenient’. The integration of the world’s economy has not been matched by an equivalent integration in worldwide society. And when economic progress is not mirrored or is not linked to social progress, discontent is generated in those left behind that ends up manifesting itself in politics. This is what may be going on in many countries amid the prospect of recovery, an uneven emergence from the crisis and, before that, globalisation, which is now generally acknowledged to have produced winners and losers. Such ‘horizontality’ has not worked out equally for all and is turning into verticality, not only through free (rather than fair) trade but also through the vertical impact of technology, which was supposedly going to level things out. According to Snower, owing to, among other factors, technological progress, we are on the threshold of a new decoupling, ‘in breadth and depth unlike anything we have encountered so far’.
Snower, who is the President of the Kiel Institute for the World Economy, is one of the co-chairs of the T20 (Think 20), the network of think tanks from G20 countries and beyond, which numbers the Elcano Royal Institute among its members. Last week it held a summit in Berlin, capital of the country that holds the annual presidency of this forum (not, however, an institution). The great decoupling between economies and society, and its various causes, was one of the key topics of debate, although there were others. Naturally, in a setting that was necessarily diverse (and representative) there were disagreements. The decoupling phenomenon is arising when the advanced economies, both industrial and post-industrial, are recovering from a crisis that still besets the emerging economies –some are being affected now– although these too have undergone a marked increase in inequality. In the OECD, 43% of the member countries’ citizens have regressed. Martine Durand, chief statistician at the organisation, points to an alarming fact: life expectancy in Europe at the age of 25 can vary by up to eight years according to the level of education, and education levels depend to a large extent on parental income levels. It is not limited, however, to people: a large number of companies have also been left behind.
The issue of inclusivity as policy has made a great impact on the agenda of the T20, and the G20, measured not only in terms of GDP per person, or in the redistribution of income, but also in terms of wellbeing. It is going to require an integrated approach at the national and international levels, and putting people at the centre, something that Argentina, the next country to preside over the G20, has already committed itself to. As Marc Fleurbaey of Princeton University argued, we must ‘prepare people for life and support them in life’, central to which is the commitment to education, particularly amid the challenge of technology and its controversial impact on employment and the concept of work. Although, as Ylva Johansson, the Swedish Employment Minister, points out, it is not so much a case of protecting jobs as protecting workers.
The idea of a basic income put in an appearance, although the person who was most staunchly against it was the winner of the Nobel prize for economics, Edmund Phelps, for whom its adoption would represent an ‘admission of defeat’, a capitulation. While various speakers advocated more social policies, the issue of which taxes would be levied to pay for them was a central question of the debates, one that had no genuine solution. Ensuring that digitalisation benefits everyone is a laudable goal, but no-one yet knows how, and nor is there consensus about its effects. Indeed, Argentina, presiding over the next G20, wants to ensure that indicators are agreed in this respect.
After a disruptive decade, ‘we have not decided on suitable priorities, even on the effects of digitalisation’, said Richard Samans, a member of the managing board of the World Economic Forum, for whom this phenomenon, coming under the umbrella of the Fourth Industrial Revolution, has produced ‘a political polarisation’. For Phelps we should worry not so much about populism however, which is here to stay, as to learn to converse with it.
Somehow or other, although no-one knows how, remedying the great decoupling will induce the vertical to become more horizontal again. Failing to achieve this will accentuate the verticality. And vertical moments tend to be more dangerous.