For more than seven decades, the twin commitments by the United States and its allies to democracy at home and internationalism abroad animated the so-called liberal order. In recent years, however, the system has faced a growing crisis. Transitions toward democracy in Russia, Turkey, and southeast Asia stalled. The states caught in the rush of the Arab Spring failed to democratize as their citizens hoped.
Now, this crisis of democracy is penetrating the core of the liberal order. Growing economic inequality and a backlash against political liberalism have left the United States and the United Kingdom internally divided. In democracies across Asia, Europe, and Latin America, social and political divisions are rife, public trust in institutions is low, and the role of science and facts in shaping public policy is under attack.
The inauguration of U.S. President Joe Biden provides an opportunity to restore democratic norms in the United States and salvage a liberal order abroad. But the question remains whether that basic idea is still fit for the purpose. Some leading voices argue that Western democracies and liberal values neither can nor should anchor a world order. The rise of an authoritarian China threatens to shift the balance of global values away from democracies and toward authoritarian regimes.
But the specter of a world order whose dominant institutions are, at best, neutral toward individual freedoms and democracy is not compelling. Nor is it a vision that the Biden administration and its allies would readily accept. The liberal order was designed to create “a world safe for democracy,” in the words of the political scientist G. John Ikenberry. The challenge lies in delivering on this vision.
Reviving the liberal order means accepting first that the crisis has come from within. Its problems are rooted in the deep economic inequalities in Western states themselves. As the Biden administration appears to recognize, it will be possible to restore that order and the global influence of liberal democratic values only if democracies first rebuild at home. Above all, these states must adopt a new domestic social contract that meets the demands for inclusion that are the hallmark of the twenty-first century.
The ability of Western democracies to shape the international order has always been inextricably linked to their economic success and to their commitment to individual freedoms at home. If they can no longer deliver these benefits, then populist leaders in the West and authoritarians abroad will remain appealing for a long time to come.
This project of strengthening democracies is especially urgent in today’s geopolitical environment. The COVID-19 pandemic has intensified growing tensions between China and the United States. If Washington and its democratic partners fail to reassert their political and moral authority by example, there will be little left to prevent the rapid spread of a more illiberal and ultimately unstable international system.
SELF-INFLICTED WOUNDS
Liberal democracies’ failings are mostly homegrown. For decades after the end of World War II, the United States’ allies in Europe and Asia carefully managed the process of economic globalization, calibrating their trade and domestic policies to prioritize social welfare and full employment. The United Kingdom formed the National Health Service in 1948, and in 1965, the U.S. Congress created Medicare and Medicaid.
Beginning in the mid-1980s, however, in their enthusiasm to secure a share of the benefits of globalization, democratic governments opened their economies to allow freer flows of finance, trade, investment, and technology. Today, it is clear that the benefits of globalization have come at a cost. Although open markets created new opportunities for some, they led to stagnant wages for others. Growth in real median household income in the United States stagnated starting in the mid-1970s, and educational achievement, especially in math and science, fell compared with similar nations. Social mobility, the hallmark of the American Dream, also stalled, even among Americans with college degrees. By 1984, only half of all children earned more than their parents (the comparable figure in the 1940s was 92 percent).
As those who engaged in arbitraging globalization prospered, those anchored to local markets grew increasingly marginalized. The advantages that social welfare programs once provided for the average citizen also began to erode, and many people now attribute their growing sense of personal insecurity to the international liberal economic order itself.
Against this backdrop, rising immigration into the United States and Europe increased fears of cultural and economic dislocation. In Europe, this sentiment intensified during the 2014–15 refugee crisis, leading to the emergence of far-right and far-left populist parties, both of which exploited the growing resentment against the liberal economic order. In the United States, populist politicians on both sides of the political spectrum shared an antiglobalization agenda, despite different philosophical origins. The United Kingdom’s surprise decision in June 2016 to leave the EU and, just a few months later, Donald Trump’s election in the United States cemented this rejection of liberalism within the two founders of the liberal international order.
Now, COVID-19 has upended this already fragile situation, bringing with it the worst public health crisis since the Spanish flu pandemic of 1918–19 and one of the worst economic recessions of modern times. It has also exposed the persistence of inequality: in the United States and Europe, the wealthy have been largely shielded from the pandemic’s economic effects. Meanwhile, the virus has disproportionately affected the lives and livelihoods of citizens in poorer neighborhoods; magnified racial divides; destroyed low-income jobs; and spread through care homes, meatpacking plants, prisons, and immigrant populations. Young people, although relatively insulated from the worst effects of the disease, are among those hit hardest by the resulting disruption to their education and employment opportunities.
FRAYING MULTILATERALISM
Since 1945, multilateral institutions have provided stability in times of crisis and helped maintain an open economy that spread economic prosperity to hundreds of millions of people around the world. The Trump administration, however, attacked organizations such as the World Trade Organization (WTO) for doing precisely the opposite—abetting the rise of China and undermining the economic security of the American middle class.
Leaders across Europe have welcomed Biden’s election because of his commitment to restore U.S. engagement with established institutions and to reintegrate Washington into more recent multilateral frameworks, such as the Paris climate accord and the Open Skies Treaty. But U.S. allies are wary of the United States’ staying power. There is little to reassure Europeans that the United States’ international role has permanently returned to the status quo ante. Many fear that U.S. foreign relations will continue to be defined by dramatic swings from conditional multilateralism to assertive unilateralism. The EU’s decision to complete a bilateral investment agreement with China just three weeks before Biden’s inauguration revealed the extent to which European governments believe they will occasionally need to prioritize their own tactical interests over loyalty to the transatlantic alliance.
To make matters worse, transatlantic ties are under stress in a global context that is increasingly hostile to democratic values. A growing number of democratic governments, from those in central Europe to Southeast Asia, are elevating the power of the state at the expense of other institutions, such as the judiciary, the press, and civil society. According to Freedom House, a nongovernmental organization that tracks democratic rights, political and civil liberties have been declining for 14 consecutive years.
In addition, the globalization that liberal democracies once championed is now turning against them, delivering benefits to new champions that don’t share the same commitment to the liberal order on which the democracies depend. By 2028, China is expected to overtake the United States as the largest global economy. By 2050, the contributions of the United States, the United Kingdom, and the EU to global GDP is expected to decline from over 40 percent in 2016 to around 21 percent.
China is also using its rising international economic clout to build up its influence at the United Nations. Of the UN’s 15 specialized agencies, Chinese nationals now head four. China is using its new access to define multilateralism according to its own illiberal norms and strategic priorities, demanding noninterference in the internal politics of states even if these contravene established commitments to human rights protections. Beijing is also weaponizing interdependence—threatening to deny access to its vast domestic market to countries that investigate the origins of the COVID-19 pandemic or call out China’s human rights abuses at home.
Russia, for its part, has integrated social media manipulation into its statecraft—sowing disinformation, sharpening cultural divides, and destroying trust in democratic institutions. In late 2020, it was likely the source of one of the largest cyberattacks ever launched against U.S. government agencies and corporations.
A NEW SOCIAL CONTRACT
Never have liberal democracies looked so vulnerable at home and so insecure abroad. If these states are to reemerge as influential forces, they will need to demonstrate that they can again nurture their citizens’ economic productivity and personal liberty. Doing so will require a new social contract between each state and its citizens—creating a twenty-first-century state with a new social purpose that emphasizes inclusion over growth.
The COVID-19 pandemic has opened the political space for a novel cross-party consensus to achieve this goal. In Japan, the United Kingdom, the United States, and the EU, parties on the right and the left united as the economic crisis escalated to support macroeconomic responses that would have been unimaginable just a few months earlier. In the United States, Congress moved swiftly to pass a series of stimulus packages including the CARES Act, a $2.2 trillion relief plan to support individuals, households, and businesses—the largest economic stimulus package in U.S. history.
Short-term fiscal packages now need to be transformed into sustained interventions. But rallying bipartisan support for large-scale, long-term public investment will be fraught, and as the pandemic drags on, the willingness to contemplate higher levels of government spending is likely to fade—especially in the United States. Polarization and entrenched divisions are already creating significant barriers for the Biden administration despite Democratic control of both houses of Congress and the White House. Biden’s decision to move forward with the $1.9 trillion American Rescue Plan without significant bipartisan support may be necessary in the short term but could further entrench partisan division.
To avoid gridlock, leaders should prioritize policies that have wide cross-party appeal. That should include public investment in infrastructure and in health, education, and affordable housing. New infrastructure can reconnect divided societies by modernizing roads, rail systems, and energy grids and extending access to broadband networks. These improvements can break down inequalities in educational and economic opportunities between peripheral and core cities, forgotten rural areas and creative urban hubs, low- and high-income families, and depressed and resilient regions. Government stimulus that emphasizes green energy would also create urgently needed new jobs.
Renewed focus on these issues will help all sectors of society—especially young people—participate in the workforce. The next generation will shoulder the long-term burden of climate risks, slowed growth, and rising debt. The ability to integrate this generation is all the more important in European states with aging economies and declining population growth rates.
To see results quickly, however, Western democracies also need to protect their economies from unfettered globalization. New rules to regulate investment by foreign companies that benefit unfairly from government support or that may hollow out local technological competitiveness make sense in the novel geoeconomic environment. In the United States and Europe, leaders are already moving to screen out hostile foreign takeovers of sensitive firms.
The challenge will be for democracies to coordinate these policies to ensure that one state’s actions do not undercut others. Aggressive interventions can undermine markets and threaten consumers. Far better to help entrepreneurs build new companies and scale them up quickly. Tax incentives for basic research, remodeled bankruptcy laws, and new patent protections would align more closely with Western values and produce better results.
Liberal democracies should also use the current fiscal stress and unprecedented government borrowing during the pandemic as an opportunity to rethink outdated national tax structures. Tax systems designed to attract foreign investment have created a dangerous imbalance between income and corporate rates on the one hand and public spending requirements on the other. This puts pressure on governments to levy indirect taxes on consumption and limit access to health care, among other austerity measures. To address these inequities, several European governments, including France and the United Kingdom, have already pledged to raise more revenue from personal property, gains on investments, and the revenues that global tech firms such as Facebook and Google earn in their countries.
REIMAGINING IMMIGRATION
Along with these policies, the United States and countries in Europe need to rethink their immigration systems. Democratic leaders must balance the obvious economic benefits of immigration against the social and cultural insecurity that it can generate. Getting this mixture right is crucial in the midst of an economic recession and rising unemployment.
The battle over immigration has become one of the most divisive issues for modern democracies. During his term as U.S. president, Donald Trump cut legal immigration by 49 percent, politicized border controls, and adopted brutal tactics including separating children from their parents. Many tolerated these repressive measures because Trump hammered home the message that immigrants were criminals who stole jobs and benefits that rightfully belonged to ordinary working Americans. Forging bipartisan support for reform efforts in the United States will now require leaders to adopt humane but tough measures targeting illegal immigration while highlighting the positive role immigrants play in the country’s economic growth, capacity for innovation, and national identity.
The optimal approach for the United States and European countries alike would include economic investment in places with high levels of emigration, such as Afghanistan, Iraq, Central America, and the Sahel; transparent and accessible pathways for both unskilled and highly skilled immigrants; strong border controls and the capacity to expel undocumented migrants rapidly but humanely; and protection for the children of undocumented residents. Biden addressed some of these imperatives in his first two weeks in office, signing three executive orders to review Trump’s immigration policies, including barriers to naturalization, family separation, and the so-called Remain in Mexico policy that has forced tens of thousands of asylum seekers to wait in Mexico until they are called to court in the United States. Biden has also proposed an eight-year path to citizenship for the 11 million undocumented immigrants living in the United States. This latter issue is one of the most difficult challenges in transitioning to a comprehensive approach, not only in the United States but in all liberal democracies. Countries should adopt a clear and realistic path to citizenship so that these immigrants can also contribute as citizens.
This more coherent immigration policy must be based on the liberal democratic values of openness, tolerance, and inclusivity. Its success depends on the ability of government leaders to make the case for a pragmatic, values-based immigration system that is sensitive to both migration’s disruptive effects and its inherent potential. Mainstream politicians must counter populist efforts to mobilize anti-immigrant sentiment based on ethnic or sectarian differences. Instead, leaders need to ground the idea of national identity not on their citizens’ race, ethnicity, or religion but on their shared commitment to liberal democratic values.
STRENGTH IN NUMBERS
A supportive international environment is a prerequisite for fixing democracy at home. At a time when Western democracies’ share of global GDP is declining, their economic competitiveness will require reliable access to international markets and new technologies. Working with trusted allies will be essential for multiplying influence and access.
The transatlantic partnership between Europe and North America must be a central element of this renewed multilateralism. The United States and Europe still enjoy the most interwoven political and economic relations of any group of states. Along with Canada, they comprise nearly one billion people, slightly below 15 percent of the world’s population but over 50 percent of global GDP. Together, their military budgets are equivalent to 57 percent of the global total, and they contribute 85 percent of international development assistance. NATO remains the world’s most powerful military alliance, and the EU is the largest and most integrated single market.
U.S. and European leaders should seize the momentum from Biden’s inauguration to renew the transatlantic partnership. In doing so, however, they also need to reach out to democracies in Africa, Asia, and Latin America. More inclusive cooperation will be essential to addressing pressing global challenges, such as public health crises, climate change, technological competition, cybersecurity concerns, debt forgiveness, and humanitarian relief.
Democratic states should first tackle these issues through existing multilateral organizations. But, where gridlock and antiquated institutions threaten to derail progress, they should rely on smaller groupings of like-minded countries with shared values and overlapping interests. By creating a core group of democracies, liberal states could boost their voices within large, multilateral bodies, such as the G-20 and the UN.
Biden, for instance, has already proposed a so-called Democracy Summit to strengthen democracy worldwide. This approach might include adopting common regulatory approaches to social media companies and surveillance technologies and efforts to prevent the spread of misinformation among voters—one of the biggest internal threats to liberal democracy.
For its part, the British government has recommended creating a “D-10” of democratic states by adding Australia, India, and South Korea to the existing G-7. This initiative is driven in part by the national security risks associated with societies’ ever-growing reliance on interconnected digital technologies. One proposed goal for this group is to coordinate its members’ domestic and foreign policies to reduce their dependence on Chinese firms for 5G telecommunications technologies and other important supply chains.
This approach is not without its challenges, however. Maintaining ideological cohesion among liberal democracies that sometimes have distinct interests is a difficult prospect. The EU, for instance, is struggling to manage democratic backsliding in Hungary and Poland. And although the G-7 is sufficiently small and like-minded, its experience with the Trump administration shows that consensus-based bodies can easily be disrupted when their leaders’ interests diverge.
These experiences warn against formally transforming the G-7 into a D-10—especially when it comes to including India. India will soon be the world’s most populous nation and its fifth- or sixth-largest economy. Its democratic constitution and strategic location, moreover, make it a logical partner. Still, India is riven by domestic divisions and inequalities. Its market size coexists with persistent levels of poverty and a fractious political system. As a result, Indian governments have long been reluctant to fully liberalize the economy. The country’s development, moreover, is now overseen by a prime minister, Narendra Modi, who uses authoritarian tactics to limit freedoms and elevate Hindu nationalism while repressing Muslim minorities.
Enlarging groups such as the G-7 to include states such as India will likely expose the original members to internal differences on important democratic values and economic policies. Membership in these organizations, whatever their purpose, should therefore be based on commitments to a carefully defined set of criteria, such as judicial independence, a free press, individual rights in the digital realm, and protections for minorities.
A separate challenge is that solving global problems ultimately depends on liberal democracies working with states outside their democratic circle. There are, however, successful precedents for progress. Since its establishment in 2003, the Proliferation Security Initiative, designed after 9/11 to limit access to materials for weapons of mass destruction, has grown from 11 to 105 members—including Afghanistan and Saudi Arabia.
This tradition has a long history. In 1947, a small group of democracies came together to establish the General Agreement on Tariffs and Trade (GATT), the precursor to the WTO. In the future, a cross-regional agreement between the diverse Trans-Pacific Partnership (TPP) countries and the EU could serve, as the GATT before it, to raise standards on fair and sustainable trade and investment. Regular coordination within a cross-regional group of this sort might also help address the current impasse in reforming the WTO.
This type of inclusive coordination will require treading a careful line between sovereignty and effective cooperation. Multilateralism that grants too much authority to consensus or great-power consent creates barriers to action and a tendency to produce lowest-common-denominator outcomes. If adhering to the WHO’s International Health Regulations were an entirely voluntary process, for example, the danger of new pandemics would increase exponentially.
The principle behind the 2015 Paris climate accord offers a way past this dilemma. The agreement relied on national alignment with an international agreement instead of delegating national sovereignty to an international body. It utilized the concept of so-called Nationally Determined Contributions, whereby governments made individual commitments to establish and meet specific carbon reduction targets. Transparency and public shaming are the agreement’s principal tools. Alongside growing public awareness, these new mechanisms are driving real change in national and corporate policies.
MAKING COMMON CAUSE
To revive the liberal international order, democratic states need to develop a common strategy toward China. Concerns about Beijing’s behavior have grown steadily as Chinese President Xi Jinping has tightened Communist Party control over Chinese society—removing presidential term limits and cracking down on domestic political dissent. Among other moves, China has incarcerated up to one million Uyghur Muslims in reeducation camps in Xinjiang and introduced a draconian national security law in Hong Kong.
In addition to the Chinese government’s secretive handling of the COVID-19 pandemic, Beijing has annexed and militarized reefs and islands in the South China Sea. An independent UN tribunal ruled the campaign illegal in 2016. China has also escalated its threats against Taiwan and engaged in a lethal military confrontation with Indian soldiers along the line of control between China and India. This all points to a more belligerent China that is unwilling to concede to other countries’ concerns.
These developments, combined with new leadership in the United States, have opened the door to a more unified China strategy among Western democracies. In the United States, China’s rise was once perceived principally as a threat to international security and U.S. economic and technological dominance. Now, Xi’s domestic policies and the crackdown on Hong Kong have galvanized U.S. concern about human rights abuses across the political spectrum.
European countries have long struggled to agree on a common position toward China. The degree of economic exposure to the Chinese market varies greatly across EU member states, making cooperation difficult. But Beijing is now seen as a threat not only to the long-term competitiveness of certain high-value economic sectors but also to human rights. The European Parliament has threatened to reject the recently finalized EU-Chinese investment agreement, for instance, unless it includes a stronger commitment from China to meet International Labor Organization standards on workers’ rights.
Coordinating a joint transatlantic strategy toward China, however, will be difficult in the years ahead. This reflects not only the concern in Europe about the long-term political reliability of the United States but also an awareness of the economic opportunity that access to China’s market presents. Democratic states in the Asia-Pacific—Australia, Japan, and South Korea, whose economies are even more dependent on access to the Chinese market than are the economies of European countries—face a similar conundrum. They joined China and the Association of Southeast Asian Nations in concluding the Regional Comprehensive Economic Partnership, a free-trade agreement that excludes the United States and India, in November of last year, even after Joe Biden’s election.
How then can liberal democracies credibly demonstrate to China that they can uphold the liberal order’s values? Contesting Chinese attempts to export its surveillance state is a good starting point. Without clear protections for individuals, the spread of digital tools such as facial recognition, machine learning, credit rating, and health monitoring threatens human rights around the world and would entrench state power at the expense of ordinary people.
The United States, European countries, and other allies should call out efforts by China and countries such as Russia that promote or adopt these tools without the necessary safeguards. A coordinated response to Chinese investment in sensitive technologies, however, would work best if democracies pooled their resources to develop their own options. Whether in an expanded G-7 or some other grouping, liberal states will need to join forces to offer effective alternatives in Western markets and beyond. In addition to 5G technologies, developing shared platforms to monitor disease outbreaks without compromising liberal democratic protections would lay important groundwork for countering the rapid spread of Chinese-inspired alternatives.
Cooperation on technology should be part of a larger framework designed to prevent China’s influence from growing in sectors central to liberal democracies’ national security, such as quantum computing, artificial intelligence, and outer space. NATO could serve as a forum for coordinating responses to these new security challenges. On this issue, it could mirror the Quadrilateral Security Dialogue, a partnership including Australia, India, Japan, and the United States that serves as a forum for Asian democracies to manage China’s regional influence.
Liberal democracies should also develop new ways of financing infrastructure projects in Africa, Asia, and Latin America. By using their collective financial and technical strengths, democracies can offer a viable alternative to the Chinese-led energy, transportation, and logistical hubs that are expanding across the developing world via the Belt and Road Initiative. In parallel, Washington could also demand that BRI projects involving the United States’ partners be carried out in collaboration with more transparent institutions, such as the World Bank and the Asian Development Bank, or with the newer Asian Infrastructure Investment Bank.
THE WORLD’S BEST HOPE
The United States needs to pair its recommitment to multilateral cooperation with a concrete strategy designed to make multilateralism work again. Otherwise, any effort to revive a liberal international order is bound to fail. Geopolitical competition will grow in an increasingly value-free international context.
The pandemic has revealed the gravity of the challenge. The question now is how democratic governments will respond. Some with high deficits, especially in Europe, may struggle to focus on necessary, long-term domestic structural changes. Public pressure could drive them toward expedient but ultimately ineffective solutions. The pandemic might also give populist parties a new boost, just as their luster was fading in the wake of a series of electoral setbacks. And in the United States, a divided Republican Party could exacerbate polarization, impeding legislative action.
Still, there are signs that Western governments are starting to align around a set of targeted domestic policies and a new social contract that could deliver more sustainable and inclusive growth. COVID-19 has also served as a reminder that the rule of law and a vibrant civil society can be a source of strength in times of crisis. When democratic governments fail, opposition parties, a free press, and civil society ensure that their failures do not go unnoticed. Contrast this with the secretive Chinese system that refuses to discuss the origins of the virus.
The COVID-19 pandemic is also opening new opportunities for cooperation among a wider and more inclusive group of liberal democracies. If these governments can use the pandemic recovery to strengthen cooperation, address domestic inequalities, and heal social divisions, states will draw some of the poison out of the current transatlantic and transpacific divisions. If they can make progress at home, liberal democracies will remain the most credible source of global governance norms deemed legitimate by the broadest segment of the world’s population.
Ultimately, an international system led by liberal democracies and infused with liberal democratic values offers the best hope for securing widespread peace and prosperity, including among those who do not share these values. The remaining challenge is this: Can liberal democracies define and lead a world order that embodies their values even if the transatlantic community and its main global partners are not globally dominant? This would be difficult. It is therefore essential that the community of liberal democracies not only prospers but begins to grow once again.
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