There is growing discussion in Western academic circles – a phenomenon that has become more pointed with the election of Donald Trump in the US – that the economic and political model that the West has followed with varying degrees of enthusiasm since the end of World War II has come to the end of its useful life. Admirers of this model in and outside the West will not be happy with this conclusion but chronic economic stasis since the financial crisis of 2007/08, now reflected in the increasingly paranoid prescriptions of the European and American right, is very much a fact of life. Apologists and nay sayers will obviously challenge these statements but the lack of economic dynamism not only in Europe but also in the US, yes, in the US, can hardly be denied. According to President Trump himself the US has lost 5 million manufacturing jobs since 1997 replacing them with a variety of low-paying, precarious jobs in distribution and transport. The dilapidated condition of US infrastructure such as bridges and the power grid and the ageing capital stock of its manufacturing sector has been remarked upon in The Economist of 3-9 May 2025.
At the same time, an interesting facet of this phenomenon is the resort to Orwellian newspeak by the Western media and commentariat in which the US economy growing at 2.5% is lauded for its dynamism the while the Chinese economy growing at over 5% is lamented for its stagnation. The American empire is clearly in its death throes as is evident in the brazen bullying and bizarre territorial demands of the current US Administration under Donald Trump which has also cast respect for international law and norms of inter-state relations and behaviour to the winds. Faith in institutions such as Western democracy and capitalism has undoubtedly been shaken in the process.
Against this background, the term ‘regime change’ has been recently given a new lease of life. The term has not been invented by the Irish historian Perry Anderson (author of many scholarly books including one that would be of interest to Pakistani and Indian readers The Indian Ideology) but he has re-used it in his masterly analysis of the problem in a talk at London University and in the London Review of Books (Vol 47, No 6, April 2025) in its historical manifestation. He states that the term in its current parlance usually ‘signifies the overthrow, typically but not exclusively by the United States, of governments around the world disliked by the West’. Originally, however, it conveyed the gradual transformation of an existing socio-economic order that was no longer accepted, or was not considered fit for purpose, by either the people or, indeed, by its ruling elites, into something else. Such transformations occurred in Europe after the two World Wars, when monarchies gave way to republics, the ‘New Deal’ in the US after the Great Depression of 1927/29 and the end of colonialism in Asia after the defeat of Japan in 1945 and the victory of the Chinese Communist Party over the Nationalists in 1949, a party that has fundamentally changed the country’s course three or four times despite being a one-party autocracy.
These changes eventually gave rise to the welfare state in Europe, although not in the US, and to the arrival of nationalist State-driven economies in post-colonial Asia. According to Anderson, and according to a variety of other scholars, writers, commentators etc. that is now the prevalent reality in the West. The post-World War II settlement has run its course, the social contract has broken down and governments are steadily becoming dysfunctional with no clearcut alternative available. A headline in the New York Times of 21 February 2025 says it all: ‘Germany is in big trouble and no one knows what to do about it’. Moreover, the growing distance between the right and left in the West in this regard suggests that achieving some kind of intellectual consensus on what should be done might be next to impossible.
How did all this come to pass? The post-1945 world and its institutional props had been built on a rare, if not unique, international consensus that had a large element of egalitarianism at its core. Welfare states came into being run by large State bureaucracies and funded by high direct and indirect taxes. Believers in fiscal constraints lost their veto power and most states accepted, indeed enjoyed, the largesse bestowed on them by Keynesian pump-priming. The resultant economic-political model was legitimised by a relatively open process of elections with left and right competing for support in the so-called market place of ideas but with the left in the ascendancy. Here, it should be stressed that while the welfare state embodied an overall social consensus it did not follow that the right had packed its bags and gone home. Messrs Hayek and Friedman on either side of the Atlantic were not even centrists; they pitched their tents well to the right and vehemently argued the merits of a small State and low taxation as a way to prosperity.
Indeed, by the 1970s these ideas had percolated into the political process and were no longer confined to quirky, largely right wing think tanks, funded now by growing corporate financial power. In fact, both Hayek and Friedman won the Nobel Prize in Economics to formally confirm the arrival of the right on the intellectual scene from which it had been seemingly banished in 1945. In 1976 in the US and in 1979 in the UK the political process delivered right wing governments that no longer believed in the welfare state. The media were their cheer leaders. It soon followed that the Western model of redistribution and equity began to be questioned everywhere.
It is true that between 1945 and 1980 there had been an interlude in which the worst excesses of capitalism were sought to be tamed. But most ruling elites had done so with reluctance
From 1980 to 2001 the remedies of the right appeared to work. As Gary Gerstle (Paul Mellon Professor of American History at Cambridge University and author of The Rise and Fall of the Neoliberal Order) shows the American right successfully fused ideas of deregulation with personal freedom, open borders with cosmopolitanism and globalisation with increased prosperity for all. And this intellectual feat was undoubtedly facilitated by the collapse of the USSR. From 1991 to 2007 it seemed as if the reaction to supposedly state over-reach embodied in phenomena like stagflation and chronic unrest in labour markets and universities had carried the day. The American remedy of neoliberal capitalism had triumphed. The State would no longer intervene in the economy; markets would deliver efficiency in the distribution of resources and in factor rewards. The State would simply sit back and play the role of an enabler. Even the provision of public goods would be marketised. Politics would no longer be a struggle between left and right but between the extreme right and non-extreme right.
During this interregnum lasting just under three decades, the right, of course, also over-reached by glossing over the impact on the global economy, of the two oil shocks in the 1970s, of the Vietnam war and of the huge increase in State and personal indebtedness in the 1980s and 1990s. The right’s over-reach manifested itself in the claim that most economic problems had nothing to do with capitalism per se. However, they, too, could be dealt with by yet more marketisation, deregulation and lower taxes. In America the right offered contradictory solutions: deregulation and tax cuts yes but also some form of autarky embodied in less international trade and more strict controls on immigration.
Very soon the increasing political and economic chaos met its denouement in the shape of the 2007 financial crisis that was followed by the Great Recession of 2008/09. Hobsbawm, the renowned British historian of Western capitalism, had candidly traced its origins from the Industrial Revolution in the 18th century without glossing over inconvenient details such as the rampant wealth of the ruling classes, the vast inequality and poverty that industrialisation begat across the world, the enslavement of millions of people from Africa in the 18th and 19th centuries and the colonisation of huge tracts of land accompanied by barely concealed massacres of the native populations living on them. Hobsbawm felt that the financial crisis was capitalism’s equivalent of the fall of the Berlin Wall presaging the need for a radical re-evaluation of the existing socio-economic order in the West.
Over the last few years, many commentators have attempted to delve deeper into the origins of the current crisis and there have been a spate of books and articles since the financial crisis of 2007/08 and the ensuing recession. Neoliberal capitalism’s self-inflicted wounds are hardly a secret and they are both conceptual and practical. It is well to remember that the traditional model of capitalism that operated in the first half of the 20th century never delivered on the tall claims that it made for itself. While there was visible progress in some indicators, such as overall output growth and international trade, it was accompanied by a massive increase in inequality, in environmental damage and in deprivation at the bottom of society. Relative poverty remained stubbornly unchanging.
With the advent of neoliberalism, deregulation enabled a steadily enlarged role for finance in Western economies – incidentally, far removed from its traditional function of providing capital for investment - resulting in a massive increase in both public and private indebtedness and this proved to be capitalism’s Achilles heel. Here, it should be pointed out that progress in the 19th century by the classical version of capitalism that neoliberals took as an ideal itself could not be separated from the historical benefits of colonial exploitation, such as cheap raw materials and the extensive use of slave labour in North America, in the Caribbean and in the richest natural resource-producing lands of South America, not to mention the availability of captive markets for Western entrepreneurs. This aspect of capitalism, however, never became part of the intellectual mainstream and both rich and poor countries remained wedded to the superiority of capitalism as an organising system for both day-to-day governance and for longer-term prosperity. Any inconvenient details were suppressed, ignored or bypassed.
It is true that between 1945 and 1980 there had been an interlude in which the worst excesses of capitalism were sought to be tamed by the introduction of publicly funded social services, such as education and health, and measures of social protection, such as unemployment insurance and old age pensions. But most ruling elites had done so with reluctance; their desire for lower taxes remained steadfast. The job of the neoliberal version of capitalism was to give a veneer of scientific credibility to these desires. With the help of a supportive media and generous corporate funding in the 1980s, neoliberal ideas became de rigueur in both policy-making and in universities and think tanks virtually across the world. Indeed, the international institutions set up after 1945 became its strongest proponents. What happened next? The precepts of neoliberalism now came to be applied, via globalisation, to the international economy. All countries were asked to deregulate and liberalise so that their economies would be able to take advantage of foot-lose international capital thus leading to a virtuous circle of higher GDP growth, more trade and more jobs. And Western-style democracy would legitimise this new politico-economic dispensation. The results are there for all to see.
In the abstract, Western democracy supposedly sanctifies the exercise of power by the national ruling elites. In practice, elections every 4 or 5 years become a charade in which politicians over-promise and under-deliver, are constantly menaced by this or that interest group, have to grapple with the complexities of creating a semblance of harmony in societies riven by ethno-religious conflicts and driven by advertising agencies obsessed by the priorities of focus groups provide slogans and catch phrases rather than carefully though-out policies. In Anglo-Saxon countries the method of elections, FPTP or First Past the Past, regularly provides governments that have the support of only a minority of the voting public, leave aside the electorate as a whole. With close social relationships in the judiciary and the media most governments in the West can effectively rule unchecked with little or no accountability as is happening in the US.
It is worth noting here that political debate in the Western generally concerns itself with trivia. It is extraordinary that in the mainstream UK media, phenomena such as declining wages, sky-high inequality, the under-funding of public services, the increasing role of financialisation and the right balance between the public and private sectors has been sedulously avoided. Instead, the preservation of the status quo has been taken as a given. This suits the ruling class as the 4-5 year cycle of elections more or less precludes any meaningful effort to tackle complex, long-standing problems and gives the ruling class freedom, via its control of the media, to keep attention focused on the ‘narcissism of small differences’ and in the voyeuristic reporting of scandals. The absence of any serious effort to address global warming, care of the elderly, child poverty, environmental degradation in Western societies such as the US and UK is a case in point.
More than five decades ago, even some mainstream commentators in the US had begun to ask why nothing works. They were of course in the grip of the despondency of the Vietnam debacle and Nixon’s Watergate scandal but beneath the façade of US prosperity and technological pre-eminence and glib assertions of American exceptionalism cracks had also appeared in the form of unresolved ethnic and social tensions within the country and the growing influence of corporate power on the political process. A thinner democracy, based on a disengaged population, had created a weary cynicism. Internationally, the US was pursuing regime change in its more familiar guise through the use of its formidable military power. Defeat in Vietnam in 1975 had followed success in Chile in 1973, and in Grenada in 1983, Panama in 1989 and in the first Gulf War in Kuwait and Iraq in 1991 US military might prevailed. Thereafter, however, US military power has failed to impose its will in Afghanistan, Iraq, Libya and Syria subjecting these hapless countries to a level of devastation and chaos from which they may never recover. Looming behind these adventures lies the unresolved situation of Israel where even with the unqualified support of the West generally, and of the US especially, its long-term future as a Western satellite and outpost has been plunged into uncertainty with its genocidal actions in Gaza. The rise of China as an economic and military power to rival the United States and the progressive decoupling of the Global South from the West are yet more additions to the narrative of Western economic and political decline.
It has to be said that the juxtaposition of economic and political stagnation with the growing resort to, indeed penchant for, military intervention is hardly accidental. The earliest critics of capitalism had alluded to its tendency to form monopolies and cartels that would straddle national boundaries in the face of declining rates of profit in individual countries. Globalisation has facilitated the maintenance of profits through the export of capital to low-cost production centres in developing countries, primarily in East and South East Asia. Side-by-side with the trend towards monopolisation, a relatively new and seemingly benign phenomenon has been the growth of rent-seeking activities in the West. Its primary manifestation lies in the massive increase in indebtedness, both public and private, over the last two decades. Helped by an implicit State guarantee, the process of increasing financialisation of many, if not most, Western economies has not made these economies more productive; instead, it has introduced a gratuitous element of risk and uncertainty that culminated in the financial crisis of 2007/08. Finance has merely legitimised gambling and rent-seeking and the US has weaponised the use of the dollar menacing countries, far and wide, with sanctions. Clientism and military threats rather than international law determine international relations.
A further manifestation is the rise of mainly US-based internet platforms that not only use and sell free information obtained from the public but also allow it to be manipulated in ways that have not only blurred the distinction between truths and untruths but affect the way the public thinks and acts. The world as a whole is awash with propaganda so that the average person has to become a full-fledged researcher to discern reality even in its crudest form. And underlying all this is the very real danger of military intervention if Western interests are seriously challenged. The result is that the entire notion of democracy has been fundamentally compromised. The very idea of ‘public interest’ motivating decision-making by the State and/or corporate entities appears to have become an academic curiosity. So much for the rules-based international order promoted in Western capitalist economies.
What is likely to be the course of events over, say, the next 5-10 years? In the West, the right is intellectually ascendant. However, its prescriptions in which it poses as a disinterested outsider are patently fanciful. Based on a demonisation of immigrants, a crude nationalism is offered as a catch-all solution for all problems. Nigel Farage, the leader of a right-wing cult called Reform, hopes to re-industrialise the UK and massively reduce personal taxes. No one questions such childish nonsense. How in that situation public services will be paid for and run is anybody’s guess. In reality, both the UK and US, will have to cut public services to the bone if personal taxes are reduced to significantly below current levels. In addition, any recognisable form of re-industrialisation is itself an unachievable ambition given the vast gap in competitiveness between the West and East and South East Asia virtually in the whole range of manufacturing. All this has to be seen against the profound and growing antipathy of the West towards the developing countries and the poor in their own countries. This suggests that not only direct help via ODA but access to Western markets for developing country exports will become more difficult in the years ahead.
If right wing nostrums become the default option in the West a gradual collapse of the Western political and economic order cannot be ruled out. This will not only have huge spillover effects for the global economy but will accelerate global warming, worsen environmental degradation and hasten social breakdown, first in the West, followed by the Global South. Because collapse can happen without prior warning some form of contingency planning to prepare for it is a critical need. From the side of government, a break from a rigid adherence to prevailing orthodoxy, such as fiscal policy, will be needed. But only pressure from below can make this happen. The sight of destitute communities lacking both financial and physical resilience should, in theory, melt even the hardest of the world’s ruling elites.
It is time therefore to work towards the formation of more democratised neighbourhoods and communities with decisions/suggestions made through grass-root participation flowing upwards and not downwards via diktats from State bureaucracies. That should not only concentrate minds but also provide a framework for the more effective utilisation of limited resources. According to Perry Anderson ‘a mathematised economics has ceased to generate original thinking’ in the shape of new policies for States across the world in the face of daunting social and environmental challenges. If it is accepted that a government’s duty is to the well-being of its people, then the way to judge its performance should not be in the form of highly aggregated GDP statistics which is the current practice but actual actual social indicators, such as those in the UNs SDGs . All the evidence suggests that we are currently witnessing the end of one era and the beginning of another. Chris Clark, the Professor of History at Cambridge has stated that ‘history tells us about the complexity of human interactions and of political institutions…reminding us that we are not alone and not the first to face potentially terrible challenges, and not the first who will master those challenges – or fail to.’ Let us not be the ones who failed.