In Europe, there is good reason to embrace the narrative of decline. Just as the Roman Empire shifted its capital to Constantinople to extend its hegemony by another millennium, abandoning Rome to the barbarians, so did the West’s centre of gravity shift to the US, abandoning Britain and Europe to the stagnation that is rendering them inert, backward, and increasingly irrelevant.
But there is a deeper reason for the pundits’ gloomy sentiment: the tendency to confuse the decline of the West’s commitment to its own value system (universal human rights, diversity, and openness) with the West’s decline. Like a snake shedding its old skin, the West is gaining power by shedding a value system which sustained its ascendancy during the 20th century but which, in the 21st, no longer serves that goal.
Democracy was never a prerequisite for the rise of capitalism, and what we now think of as the West’s value system is not a prerequisite for it, either. Western power was built not on humanist principles but, rather, on brutal exploitation at home coupled with the slave trade, the opium trade, and various genocides in the Americas, Africa, and Australia.
During its ascendancy, Western power went unchecked abroad. Europe sent millions of colonists to subjugate peoples and extract resources. Europeans pretended the natives they saw were not human and declared their land terra nullius, a land without a people for settlers craving that land – the first act of every genocide from the Americas, Africa, and Australia to Palestine today.
But, while unassailable abroad, Western power was challenged at home by its wretched lower classes who rose up in response to economic crises caused by the inability of the many to consume enough of the goods they were producing in the factories belonging to the few. These conflicts spilled over into industrial-scale warfare between Western powers vying for markets, culminating in two world wars.
As a consequence, the West’s elites had to make concessions. Domestically, they acquiesced to public education, health systems, and pensions. Internationally, outrage at the West’s cruel wars and genocides led to decolonisation, universal declarations of human rights, and international criminal courts.
For a couple of decades after World War II, the West basked in the warm glow of distributive justice, the mixed economy, diversity, the rule of law at home, and a rules-based international order. Economically, these values were served extraordinarily well by the centrally planned, US-designed global monetary system known as Bretton Woods, which allowed America to recycle its surpluses to Europe and Japan, essentially dollarising its allies to sustain its own net exports.
But then, by 1971, America had become a deficit country. Rather than tighten its belt in Germanic style, the US blew up Bretton Woods and blew out its trade deficit. Germany, Japan, and later China became net exporters, whose dollar profits were sent to Wall Street to buy US government debt, real estate, and shares in companies that the US allowed foreigners to invest in.
Then, the American ruling class had an epiphany: Why manufacture stuff at home when foreign capitalists could be relied upon to dispatch both their products and their dollars to the US? So, they exported whole production lines abroad, triggering the deindustrialisation of America’s manufacturing heartlands.
Wall Street was at the heart of this audacious new recycling mechanism. To play its role, it had to be unrestrained. But wholesale deregulation needed an economics and a political philosophy to support it. Demand created its own supply, and neoliberalism was born. Before long, the world was awash in derivatives surfing the tsunami of foreign capital inundating New York’s banks. When the wave broke in 2008, the West nearly broke with it.
Panicked Western leaders authorised the minting of $35tn to refloat the financiers while imposing austerity on their populations. The only part of these trillions that was actually invested in machinery went to building up the cloud capital that gave Big Tech its pervasive power over Western populations’ hearts and minds.
The combination of socialism for financiers, collapsing prospects for the bottom 50%, and the surrender of our minds to Big Tech’s cloud capital gave birth to a Brave New West, whose overweening elites have little use for the last century’s value system. Free trade, anti-trust rules, net zero, democracy, openness to migration, diversity, human rights, and the International Court of Justice were treated with the same contempt with which the US treated friendly dictators after their usefulness ended.
With Europe rendered impotent by its inability to federate political power after it had federated its money, and the developing world more in debt than ever, only China is left standing in the West’s way. The irony, however, is that China does not want to be a hegemon. It just wants to sell its wares unimpeded.
But the West is now convinced that China poses a lethal threat. Like Oedipus’s father, who died at his son’s hand because he believed the prophecy that his son would kill him, so the West is working tirelessly to push China to take the plunge and seriously challenge Western power, such as by turning the Brics into a renminbi-based Bretton-Woods-like system.
In 2024, the West continued to grow stronger. But, with its value system in the gutter, so did its penchant for engineering its decline. – Project Syndicate
- Yanis Varoufakis, a former finance minister of Greece, is leader of the MeRA25 party and Professor of Economics at the University of Athens.
