Niall Ferguson’s new biography of Siegmund Warburg is interesting in many respects, but it illuminates in particular one aspect of Warburg’s belief system: even in the latter part of his life — the 1950s through his death in 1982 — he believed that he was witnessing the decline of European civilization. Given that he saw in those years the greatest rise in European living standards the continent had ever seen, that belief looks in retrospect eccentric. Yet as signs of recession and long-term change multiply following the 2008 meltdown, one is forced to ask: was Warburg simply right, but too early?
The decline of European civilization was a popular belief for Europeans of Warburg’s generation. They had been brought up on Edward Gibbon’s “Decline and Fall of the Roman Empire.” That began with the blissful Age of the Antonines (Roman Emperors Nerva, Trajan, Hadrian, Antoninus Pius and Marcus Aurelius, AD 96-180) which was still regarded in Gibbon’s 18th century as the high point of human civilization (Gibbon and his contemporaries did not know much of the joys of Song Dynasty China, AD 960-1279). Following Marcus Aurelius’ death in 180, his son Commodus was a distinctly less attractive Emperor, and the Empire (or at least its western half) declined over the next three centuries into barbarism and disintegration. Modern economic and archeological studies have tweaked Gibbon’s narrative a bit, without destroying its central structure.
For Warburg and his contemporaries, the early 20th Century seemed to follow a similar pattern. Their childhood was spent in the Edwardian dream-world, where international and domestic tensions seemed unimportant and it appeared that a century of general peace would become a second century. Then the world was plunged into war and, for Warburg and other Germans, into two decades in which hyperinflation was followed by deep depression, then by anti-Semitic totalitarianism and another war. It was thus not surprising that by 1935 or so Warburg was convinced European civilization was falling apart; indeed British contemporaries were saying the same thing, with considerably less justification since in Britain the 1930s were until the Munich crisis something of a middle-class Nirvana.
Many British writers joined Warburg in agreeing with the “decline of civilization” meme in the 1950s – they were mostly middle class, and the British middle class suffered a sad loss of wealth and status between 1938 and 1951. However Warburg as a German, and even his British contemporaries had less and less reason for declinism as the post-war years wore on. By 1960, Germans were already enjoying a standard of living far above that of 1914, and by the late 1960s even the British middle class had recovered much of their affluence, although confiscatory taxation and continued inflation made things tight at the top of the economic scale.
Admittedly by the 1960s the rise of pop culture and the proletarianization of the arts had made declinism of a different sort plausible – the ability much prized in the 19th Century House of Commons to bandy Latin tags was rapidly disappearing – but even there it should have been clear that the overall standard of education had improved, and that knowledge of the classics had been replaced among educated people by a far higher degree of scientific sophistication. By Warburg’s death it should have been as obvious that 1914 was not the ultimate pinnacle of human civilization as it should have been obvious to Gibbon’s contemporaries that 180AD wasn’t.
From the vantage point of 2010 it is clear that the years 1945-2007 saw a huge increase in human possibilities, in which the aristocracy and middle classes may have improved their living standards only moderately, but everybody else, in particular disadvantaged groups like the British proletariat and above all African-Americans, improved living standards beyond all comparison. While cultural levels in certain respects declined, whatever art form you take was hugely enriched by new technology. The Internet and Wikipedia made the acquisition of knowledge a trivial matter on any subject, modern recording techniques allowed people to listed to far more classical music much more frequently than had been possible in 1914, while even art and drama were made both more accessible and more diverse than had ever previously been the case. If most of the population did not appreciate the cultural artifacts available, those artifacts had become infinitely cheaper and easier to access for those who were interested. Materially and culturally, we are in 2010 far ahead of our Edwardian ancestors.
Nevertheless, in the economic sphere the easy dominance of the western nations may have ended. Before 2007, only Japan had come to rival the United States and western Europe in living standards, while the re-integration of Eastern Europe into its western neighbors suggested that the economic influence of Europe was if anything increasing rather than declining. Global culture had become more diverse, but the diversity was mostly a case of a wealthy Western public enjoying the best of what other cultures had to offer – there was little threat to their lifestyles from Peking Duck, Bollywood or karaoke, and little threat to their economic livelihood from the increasing wealth of emerging markets.
In the latter area, things appear to have changed, which is why “declinism” is coming back into favor. Two years in which the Western economies shrank or barely grew while emerging markets, China and India above all, powered ahead, have sharply altered the economic balance of power, bringing us much closer to the new world order that futurologists had envisaged for 2050. Living standards in most Western countries, having been artificially inflated by a credit bubble, have declined significantly, while unemployment has soared and U.S. long-term unemployment has reached levels not seen since World War II.
The declinist case thus has great plausibility. It is increasingly clear that wage levels in wealthy countries have lost much of the geographical protection which used to shield them from downward pressure from the huge population centers of emerging markets. As discussed here a few weeks ago, with India and China between them providing 2.5 million new low-paid workers, and becoming fully connected to the global economy, it’s reasonable to suppose that Western living standards will continue converging with emerging market living standards, as labor becomes less valuable and raw materials more so.
Geopolitically, the declinist case is even more plausible. The United States must now embark on a prolonged period of budget austerity, which will inevitably involve lower defense spending and less international activity. The vacuum will inevitably be filled, most likely by China, India and Brazil rather than by Russia, which has its own economic and demographic problems. Given China and India’s overwhelming population advantage, it seems likely that before their living standards are even close to those of the U.S. or Western Europe, they will dominate the world political scene.
Without economic or geopolitical dominance, goes the declinist theory, the West is unlikely to retain cultural dominance. Such archetypically western art forms as the opera, the novel and the symphony will become minority tastes, of mere historical significance, submerged in a sea of manga, salsa and sutras.
Declinism thus has a lot of steam behind it, and you can expect to hear a lot of it in coming years, particularly if the US recovery remains sluggish and unemployment high. However I don’t entirely buy it. There is every likelihood that Western and emerging market living standards will converge partially, but most of that should be through improving living standards in emerging markets rather than deep impoverishment in the West.
Provided that Western government spending is kept under control, so that private sectors have room to flourish, and interest rates are fairly quickly restored to levels that encourage saving, the Western advantages of capital, education, technology and favorable business climate will ensure that growth resumes, so that economic dominance does not pass wholly to the East. Moreover China and India are not without problems of their own; in China’s case a banking system with potentially massive bad loan problems, in India’s case a chronically overspending, corrupt and inefficient government. The chances are that the United States will still be among the most prosperous countries in the world in 2050, as will most of Europe.
Indeed, in terms of per capita income (ignoring petty oil states) my bet for Number One in 2050 would be not China but Germany. The “demographic deficit,” seen by many commentators as holding it back, may turn out to be an advantage, as the country’s resources and infrastructure prove ample for a gradually declining population, while better healthcare and sophisticated late-life education and training systems enable highly educated well-paid Germans to remain productive members of the workforce until 75 or 80.
Geopolitically, the case for declinism is as not as watertight as it initially appears. If China and India are to flourish, it will be through continual improvement in their education systems, thereby improving their living standards. Their wealthy, well-educated populaces will then have a lot to lose from expensive and dangerous geopolitical adventurism, and so the chances are that international relations will remain governed by such institutions as the G20, in which emerging markets play an important but not dominant role.
As for culture, Asian fastidiousness in the population superpowers of India and China is likely to ensure that the cultural best will survive and even flourish; after all it’s not the Asian kids that are the principal debasers of U.S. culture. There will be even more of an eclectic cultural mix than at present, but high standards of education will ensure that “high” culture, of whatever nationality has an important worldwide presence. Jane Austen will still be read by the emerging English-fluent elites of the future, even if she is joined on their bookshelf by Confucius.
Warburg was wrong, except in the short term, when in the early and mid twentieth century he took the political, military and economic traumas he saw to portend the decline of European civilization. Likewise today, we would be wrong to doubt the survival of the most important elements in our economies, influence and culture. Compared with Warburg in the middle 1930s, a German Jew facing the need to start again in a foreign country in the middle of the Great Depression, most of us are still very lucky indeed.
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)