Ricardo Pascoe Pierce
Until the COVID-19 pandemic hit, the world was slowly eradicating extreme poverty, and the incomes of countries in the North and South tended to move closer together. According to the UN, between 1990 and 2014, more than 1 billion people were lifted out of extreme poverty on all continents. In 2020, the COVID-19 crisis caused 71 million people to fall into extreme poverty, compared to 2019.
The global poverty rate declined by 1.1% per year on average, falling from 37.8% in 1990 to 11.2% in 2014. From 2014 to 2019, the rate of poverty reduction fell by 0.6 percentage points per year on average. Due to the devastating effects of the COVID-19 pandemic, it is now projected that eradicating extreme poverty in the world by 2030 is no longer an achievable goal. The 2030 Agenda’s priority objective is to end poverty in all its manifestations and all parts of the world, which is an indispensable requirement for sustainable development.
The same trends occurred in Mexico as in the rest of the world during the COVID-19 pandemic. In 2020, extreme poverty increased from 17% to 22%, and plain poverty from 49% to 56%.
In addition, 54.1% of Mexico’s labor force is employed in the informal sector. Of all men engaged in productive activities, 53.1% are employed in the informal sector. And of the 100% of working women, 55.5% are in the informal sector.
These data highlight that the age-old problem of a more equitable distribution of wealth is not only diminishing in degree and dimension but is growing. This growth in inequality is accompanied by widespread social perceptions of dissatisfaction and discontent with the current state of affairs, both in the world in general and in particular countries such as Mexico.
The shared world situation tends to generate two state models of response to social moods in different societies. On the one hand, there is a “magnanimous” State response, consisting of massive social programs for the most marginalized sectors of the population, gaining sympathy but generating economic deficits that generate inflationary escalations and devaluations of national currencies in endless cycles.
In addition, financing social programs is detrimental to the quality of services that the State should provide to society as a whole: health, education, transportation, basic urban and rural infrastructure, roads, cheap energy, etc. It completely neglects research, culture, and technological development.
The other model offers a different method to solve the problems of a society with serious deficiencies. It emphasizes the activity of the private sector as a stimulus to the economy’s activity, a promoter of employment, and a supply of wages to obtain the necessary satisfactions for the individual and social life of people. In this model, the State is responsible for the health and education of the population, presumably of good quality, as a response to the taxes citizens pay. Services such as transportation, energy, roads, and other infrastructure necessary for economic efficiency must be provided by private capital, although authorized by the State. Thus, the State is conceived as a regulator to temper profits and ensure the best distribution of wealth.
Both models are based on the idea of a capitalist economy. However, their differences are enough to create antagonisms and warlike feelings. The first problem, apparently superficial, although it is not, is the intervention of the State in the economy. The two extremes of this argument are those who affirm that the State should not participate in the regulation of the market or subsidize the production of goods and services, versus those who advocate that the State should be the owner, conductor, regulator, and CEO of the economy and its productive activities.
Apparently, this discussion ended when the USSR disappeared, and the confrontation between capitalism and socialism ended. At that time (1989, 1990, 1991), the idea was that capitalism reigned and had won the war against socialism. However, over time, the issues of the state, the economy, and capitalism have emerged again, albeit under a different guise.
Since the establishment of State monopoly capitalism in China and the capture of the State in Russia by oligarchic capitalism, the debate is not capitalism vs. socialism but State monopoly capitalism vs. free market capitalism. And that confrontation of models of capitalism directly affects profits and their flows in the model, along with governance models, which suggests a cultural confrontation behind the economic models on issues of democracy, representativeness, freedom of speech, and freedom of the press. The open market requires democratic institutions, while state monopoly capitalism requires state control, the nature of which is inherently undemocratic and authoritarian.
One conclusion about this debate is that contrary to the assertion by the traditional defenders of capitalism that, to flourish, capitalism implies and requires freedom and democracy, today, we are witnessing that this thesis is not necessarily applicable in today’s world. There can be conditions for state-directed and state-controlled capitalism to flourish and be successful. That is obviously the case in China.
And it is also clear that the differences between Chinese and Western cultures are enormous. According to The Economist, the English magazine of economic analysis, the Chinese company TikTok is frustrated because “Westerners do not have the same consumption patterns as the Chinese…and, therefore, the App is not being efficient in promoting Chinese products to the West.”
Labor discipline in China is very different from that in the West. When was the last time you heard of a strike in China’s automotive and aerospace sector? In the West, they are frequent. Hong Kong has ceased to be a liberal democracy and has become an object of political control by the Beijing authorities. The same will happen if China takes over Taiwan.
Culture, democracy, authoritarianism, and profit are at the center of the debate in the new world. These geopolitical blocs are not an accident of history. They are historical products. The United States, Europe, and its allies identify themselves according to cultural and social models and aspirations. China, Russia, North Korea, and Iran also share aspirational, similar paths and similar political models. These are the blocs that will define the future of the world for the next 50 years. And, like it or not, the rest of the world will be defined by these blocs and their developments.
These large blocs of nations, united despite their great diversity in hegemonic intent and aspiration, will define the next wars, commercial and military.
@rpascoep
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