The specter of global disintegration
It's the end of the world as we know it. The world is disintegrating, and much of the highly visible noise and chaos is a symptom of a much deeper problem.
Driving the news: In Hong Kong, millions of demonstrators are taking to the streets in a desperate attempt to preserve their democratic freedoms. In Argentina, the government has been forced to implement capital controls to prevent money from fleeing the country. In Britain, incoming Prime Minister Boris Johnson has lost his majority, his long-coveted control over legislation, and even his attempt to call a new election. Brexit uncertainty has never been greater.
These are high-stakes dramas, and their outcomes matter greatly. Hong Kong is a great test of whether Xi Jinping's China is remotely compatible with Western liberalism. Argentina is a great test of whether a market-friendly government, working closely with the IMF, can turn an economy around. Britain is, in many ways, a great test of democracy itself.
- So far, in all three cases, the outcomes have been profoundly disappointing and depressing, even as some hope remains.
Zoom out: In a bigger sense, the final outcomes don't matter. In all 3 cases — and, most importantly of all, in Trump's America — what we're witnessing is the spectacle of global integration being thrown suddenly and jarringly into reverse.
- Even if Hong Kong's demonstrators have all 5 of their demands met (right now it's 1 down, 4 to go), China has made it abundantly clear that it has no respect for the "one country, two systems" framework, which in any case is scheduled to end in 2047. Hong Kong is arguably the most internationally integrated city in the world, which means the only direction from here is backwards. As Dan Harris put it 3 weeks ago in China Law Blog, "Hong Kong as an international business and financial center is no more."
- Even if Argentina's Mauricio Macri wins the general election, yet another bond default is inevitable. Whatever international credibility Argentina had regained over the last four years of Macri's presidency is irretrievably lost.
- Even if Britain manages to avoid a no-deal Brexit — even if it manages to avoid any Brexit at all — the desire of half the nation to cut itself off from its major trading partners is going to dominate British politics and economics for decades to come.
The bottom line: The postwar economic order was built on ever-increasing integration, and there is no precedent in modern history for how — or even whether — the global economy can cope with its opposite.