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Low growth, bad politics?
The G20 Summit is to meet in Hangzhou, China this weekend, so be ready for a flood on global leaders’ meetings. Christine Lagarde, managing director of the IMF, started it off this Thursday. “We need forceful policies to avoid the low-growth trap” was the headline of her G20 briefing note. This is a reality check coming after the summer recess: either take measures to jumpstart growth, or get ready for rising populist rhetoric about globalization and its consequences. At the end of the day, economics doesn’t stay confined to its own world . It is all about politics in the last analysis. Low growth brings in bad politics, and bad politics is what has been eroding the stability of the global system.
No wonder Trump is rising in the polls through unapologetic economic nationalism and racism. His wall on the US-Mexican border is to have “sensors above and below.” The word “politics” is a dirty word today, but in essence it is what enables people to live side by side in peace. Bad politics is about building walls and excluding people. It’s as simple as that.
It is also no wonder that Turkey bashing has become an integral part of political debate in Europe of late. Forget the Brexit campaign, now even social democrats in Austria are becoming part and parcel of this race to the bottom. It is no longer about left and right, but rather base instinct. Trump in the US, Orban in Hungary, Le Pen in France, are trying to move xenophobia, and especially Islamophobia, away from the fringes of political discourse, and into the center. In those societies, this is a way of reclaiming the nativist essence they lost with the globalized middle to upper classes. The battle lines are drawn, and if these people have to tear down the post-war liberal world order to win, they will.
Meanwhile, the liberal order really has seen better days. 2016 is to be the fifth consecutive year of lower than average growth, according to the IMF. During 1990-2007, average global growth was around 3.7 percent. The IMF’s expectation is still around 3.1 percent for this year. The growth champions of the G20 this year are expected to be India, China and Indonesia, all of which are due to stay above 4 percent. Turkey comes in at fourth place, with a little bit below 4 percent. South Korea is just behind Turkey. For developed countries, the situation is more serious. They are one percentage point below their 1990-2007 average of 2.5 percent. Worse still is the growing inequality, both among and within countries. Low income earners in developed countries cannot get their fair share of even this lousy growth. Those are the uneducated white people in the US, the monolingual high school graduates in France, the rural Poles, and anti-immigrant Poles. Left untended, that is where economic stagnation festers.
Does low growth necessarily go hand in hand with bad politics? No. That is where Chancellor Merkel’s Germany shines. 56 percent of Germans agree with the proposition that “Migration makes Germany more diverse”. This doesn’t mean that there is not a neo-fascist strain to German politics – there is – but it is met with a forceful liberal response. Having gone through a recent history of racism and walls-building, Germans have a keen sense of its dangers. They have learned to harness the power of diversity and heterogeneity, and they’ve learned to do it well.
It is not right versus the left any more. It is all about the values of the Enlightenment enshrined in politics by the liberal world order. It’s all about democracy, the rule of law, human rights and through all that, empowering the individual. That is what Chancellor Merkel represents.
Among G20 countries, Turkey shines in the latest IMF growth estimates. Yet the Turkish Purchasing Managers Index (PMI) has just gone south rather rapidly in August. That means that IMF revisions will indicate lower growth in Turkey. This is a time Turkey has to follow the German example. Lower growth does not necessarily mean bad politics. Turkey needs to make a choice: it can either criticize from its high horse as Islamophobia spreads across Europe, or it can take an active stance in the refugee issue and side with those politicians who have the courage to speak out against Islamophobia in their own countries.
Countries need to take a long view when it comes to the low growth bad politics equation. Globalization brings diversity. 13 percent of the US population is composed of migrants, yet their share among American entrepreneurs is around 26 percent, so double their share of the total population. Diversity is good for creativity and growth. Syrian refugees in Turkey, despite their dire situation, are also starting businesses all across Turkey today, enriching our country and making it a more diverse place to live. Turkey has been fostering this sort of interaction instinctively, suggesting that in some ways, it has absorbed more of liberal globalization than even its own leaders realize.