The Four Horsemen of the Apocalypse (Source: here)
SUMMARY: If you want to despair, how about this? The four most important problems in the world are global and cannot be solved by nation states. But the world is doubling-down on nationalism. This bodes very badly for the future.
In the New Testament's Book of Revelation there is talk of the four horsemen of the apocalypse as harbingers of the end of the world. The red horse symbolises war, a white horse pestilence, the black horse is famine, and the pale horse is meant to signify conquest and the dissolution of empire.
The New Testament is obviously a bunch of fictional nonsense, but there is no disputing that the world today grapples with four modern horseman-like problems: cross-border violence, economic contagion, environmental destruction, and global migration.
And these four problems are far from trivial. Unlike the problems humanity has faced in the past, these are global problems. They affect all of us regardless of where we live and they can only be solved if we work together.
To most people alive today, global problems seem rather mundane, but they are in fact a relatively recent phenomenon. Five hundred years ago, when the human population was well below 500 million no one had any concept of global problems. Most people lived in relatively isolated communities. The idea that human activity could meaningfully impact the environment was ridiculous. Connections between regions - migration, trade, investment - were uncommon, if they existed at all. What happened in one part of the world had very little impact on what happened in other parts.
Not so today. In the last five hundred years, humanity itself has globalised and so has our problems. Incredible leaps forward in science and technology have allowed food output, productivity, and health to grow to such an extent that the world now sustains a human population that numbers 8.1 billion. We communicate with each other anywhere in the world in an instant. Anyone with money can buy a ticket and travel around the world on a commercial airliner in just two days.
World population - with forecast out to year 2100 (Source: here)
The four horsemen of our time - cross-border violence, economic contagion, environmental destruction, and global migration - are direct results of the explosion in human population and advances in technology over the past few hundred years. Unfortunately, our ability to solve global problems has not kept pace with our expansion as a species and its derivative problems.
At root, the problem is that our basic unit of political organisation - the nation state - is wholly unsuited for solving global problems. Hence, we either have to find new ways for states to work together more effectively, or we have to move on from the concept of the nation state to something better.
The rest of this essay illustrates the short-comings of the nation state in dealing with the four big global problems facing humanity today and puts forward three scenarios for how things may evolve going forward.
The Red Horse: Cross-border violence
Conflicts are not constrained by borders. The men who flew planes into the Twin Towers on 9/11 were from Saudi Arabia, but chose to pitch battle in New York. Nor did the men and women whose task it was to respond to the 9/11 attacks fight at home. The US-led ‘coalition of the willing’ promptly invaded Iraq and Afghanistan, two countries that had not even taken part in the 9/11 attacks. When the fighting eventually died down, some 500,000 civilians had lost their lives, leaving in its wake seething anti-Western sentiment, which to this day fuels cross-border violence in the Middle East and elsewhere.
The reason why perpetrators of cross-border violence, whether they be state or private actors do not respect borders is that their enemies, even when local, are usually backed by foreign powers. Moreover, economic interests are now global. A threat to, say, oil production in Kuwait directly impinges on the national interests of Europe and the United States, which is exactly why the West went to war with Iraq in early 1991 in the aftermath of Saddam Hussain's invasion of Kuwait the previous year.
The concept of the nation state can be traced back to the Peace of Westphalia in 1648, which granted sovereignty to a number of countries. Cross-border violence eventually went global with the dawn of the Age of Empire, facilitated by the invention of new technologies that allowed men with superior weaponry to travel to far flung corners of the world to satisfy their hunger for conquest.
From the start, however, nation states proved themselves ineffective in preventing cross-border conflicts. In fact, many will argue that nation states themselves are a major contributor to global conflicts. Following catastrophic failures of nation states to maintain the peace in World War I and World War II, the world briefly began to place faith in multilateralism with the establishment of the United Nations.
However, since the post-9/11 invasions of Iraq and Afghanistan the United Nations has been in retreat and cross-border violence has taken on a distinctly more opportunistic hue. Faith in multilateralism has largely collapsed. The Iraq and Afghanistan invasions were themselves partly to blame, because they were ‘justified’ using doctored evidence about the existence of weapons of mass destruction. War-weariness has since become an issue in many Western countries and suspicion about the West’s true intentions (and understanding of its stomach for conflict) have further undermined faith in Western-led multilateralism.
A key turning point was 2012, when the West found itself unable to assemble a coalition to stop Syrian President Bashar al-Assad from using chemical weapons against his own people. This was a green light for bullies the world over were to take matters into their own hands. In 2014, Russian President Vladimir Putin thus annexed Crimea. Between October 2016 and January 2017, the Myanmar military inflicted a genocide on the Rohingya people. In 2022, Putin invaded Ukraine. In late 2023, Netanyahu felt sufficiently confident in his own impunity to unleash a grotesquely genocidal punishment upon the people of Gaza for the attack perpetrated by Hamas 7 October 2023.
The White Horse: Economic contagion
Just as nation states have been largely powerless to prevent cross-border violence, whether the perpetrators be state-backed or otherwise, so financial crises have largely been outside the control of nation states. The few success stories in fighting financial contagion have all be multilateral ones, but these interventions have been far from perfect. They have had major domestic and global side-effects, while the financial system itself continues to be heavily biased against poorer countries.
The 2008/2009 Global Financial Crisis (GFC) and its aftermath illustrate these problems quite well. The GFC itself originated in the US housing market, but the two first banks to go bust were German Landesbanks. Contagion was inevitable due to the global integration of financial markets; pension funds in Germany have exposure to US mortgages just as US pension funds have exposure to German Bunds.
Cross-border diversification is always a good thing, but financial markets today are truly gigantic. Global equity market capitalisation is about USD 110 trillion (see here), while the global bond market is even larger at around USD 130 trillion (see here). This compares to global GDP of around USD 100 trillion (see here). In other words, financial markets - even without counting commodities, currencies, crypto, and swaps - are about two and a half times larger than the total output of the entire world economy in a whole year.
Stability of such enormous and integrated financial markets can not be guaranteed by a global institution like the International Monetary Fund (IMF), let alone a single national regulator. Regulators and central bankers across the world therefore have to work together to maintain stability. Sadly, they don't always do their jobs properly. In the run-up to the GFC, there were huge regulatory failures, so when the crisis finally erupted the fallout was instantly global in scope.
So, too, was the policy response. Unfortunately, the policy response was designed mainly with the national interests of the world's most powerful nations in mind, with scant regard to its effects on lesser nations. In an unprecedented coordinated action involving the major central banks a massive subsidy programme for financial assets known as Quantitative Easing (QE) was launched. However, the QE asset purchase programmes only targeted developed market assets, thereby grossly distorting valuations across global markets. Investors responded to the QE subsidy by pouring vast sums of money into European and US markets even though these markets already had an abundance of capital. Much of the inflow to these markets came from already capital-deficient Emerging Markets (EM). The inflows to the US also pushed up the Dollar, which further encouraged outflows from EM local markets. Hence, while QE restored confidence in developed economies it ended up worsening the global income distribution by inducing financial tightening in poorer nations.
In addition, there were major side effects within rich countries, which also ended up having global ramifications. By pushing up stock and bond prices in the United States, QE naturally favoured wealthy Americans. The resulting rise in income inequality contributed significantly to a rise in Trump-style populist politics, which has since triggered a raft of protectionist policies, including Trump’s trade war against China.
Meanwhile, the regulatory changes that were approved after the GFC never came to terms with the single most important cause of financial crises, namely bubbles. Financial bubbles are almost exclusively a developed market phenomenon, because the financial system is so heavily rigged to ensure that most of the world's capital goes to rich countries. In fact, regulation after the GFC arguably made the risk of bubbles worse by increasing the discrimination between bonds issued by rich and bonds issued by poor countries. Bonds issued by rich countries are given a zero risk rating, while bonds issued by poor countries are given non-zero ratings. A zero risk rating means that banks and institutional investors can hold as many bonds as they want without setting aside any capital to cover potential losses. By contrast, investors are required to set aside considerable capital to cover potential losses when they invest in bonds from lower income countries. The cost of these risk buffers obviously rises with market interest rates, but only for lower income countries due to their non-zero risk rating, so banks and institutional investors have strong incentives to off-load bonds from poor countries and load up on bonds from rich countries in crises. This amplifies the volatility of poor country bonds and lowers it for rich country bonds, not because such price action is warranted by fundamentals, but solely because of mechanics of the biased regulatory system.
As long as global financial regulation is multilateral in name only, it will be run by and for powerful nations and heavily discriminate against less powerful nations. Such as system can never deliver stability, let alone an efficient allocation of global capital.
The Black Horse: Environmental destruction
Nature has been the single greatest casualty of rapid human population growth. Global temperatures are rising faster than the worst predictions, posing an existential threat to many human communities, especially in warmer parts of the world. Non-human life is even more in trouble. Since 1970, biodiversity on earth has dropped by a shocking 69%, equivalent to a very, very bad mass extinction event. The natural world, even with its tremendous capacity to adapt, has been completely unable to keep pace with the rise of humanity. Modern technologies have offset some of the adverse consequences of population growth through more efficient use of resources, but nature is nevertheless struggling.
Global loss of biodiversity, index 1970=100 (Source: here)
Nation states are largely powerless to address the challenges posed by environmental collapse, both biodiversity and the climate. Suppose, say, Scotland decided to adopt aggressive policies to reverse global warming. Unless the rest of Europe and the United States as well as a bunch of other large nations adopted similar policies, Scotland’s efforts will be in vain.
Recent political developments in the West are probably making the outlook for nature even worse. The rise of Far-Right populist governments is bad news, because they tend to be more myopic and to care less about the environment.
Britain is a case in point. Brexit had barely became a legal fact when UK Prime Minister Rishi Sunak, a Far-Right nationalist, watered down Britain’s erstwhile ambitious net zero commitment, which had only adopted under great fanfare a few years prior.
Soon afterwards, Sunak gave approval to privatised water companies to pour untreated sewage into rivers in what now appears to have been a misguided attempt to stave off their bankruptcy. EU's stricter environmental regulations would not have permitted sewage to be poured in rivers. Today, there is so much raw sewage flowing through Britain’s rivers that the Oxford rowing team fell ill with E. coli bacterial infections after training on the Thames ahead of the 2024 Boat Race.
(Source: here)
The Pale Horse: Cross-border migration
Of the four big global problems, cross-border migration is without a doubt the most politically explosive. From an economist’s perspective, cross-border migration is a good thing. Immigrants help to fix the ageing population issue, augment economic growth by increasing the labour force, and their movement from poor to rich countries increases economic efficiency and reduces global inequality.
Unfortunately, culturalism - the cultural equivalent of racism - makes it very hard for nation states to harvest the benefits of immigration (for a discussion of the origins of culture see here). In today’s hyper-globalised world, the Far-Right has emerged as the single most powerful political movement in Europe and the United States, buoyed largely by its platform of xenophobia. In a bid to take the wind out of the sails of the Far-Right, the rest of the political spectrum has adopted tougher immigration policies too, so policies to dehumanise foreigners have become completely mainstream.
This approach of being tough on immigrants is unlikely to work. Despite degrading and inhumane treatment, immigrants will not stop coming to rich countries. You cannot stop the most entrepreneurial risk-takers in poor countries from undertaking the perilous journeys, because their urge to migrate is grounded in a desire to improve the quality of their lives, which is one of the most fundamental of all human urges.
What, then, happens when the rock of xenophobia meets the hard place of cross-border migration? Again, Britain’s experience throws some light on matters. Brexit gave the British government a strong mandate to clamp down on immigration, because large numbers of British voters supported Brexit as a means of putting a stop to immigration. Yet, as Jonathan Portes, an expert on public finances and immigration has pointed out, immigration to Britain has gone up significantly since Brexit as the chart below shows.
(Source: here)
The rise in immigration to Britain, while good news for the British economy, has been a disaster for Sunak. In a bid to divert attention away from this misfortune, Sunak has aimed his vitriol at refugees, even though refugees are actually a mere footnote in the larger immigration story. Billions of pounds have been wasted on hare-brained schemes to keep asylum seekers out, but funds send to France have so far not lowered the numbers of refugees crossing the English Channel. As far as the notorious Rwanda scheme is concerned, only three home secretaries have so far been sent to Kigali (and sadly all three returned). The latest news from Kigali is that Rwanda has started selling the houses that were intended for asylum seekers from Britain. Dealing with immigration is, to put it mildly, proving extremely difficult for a nation state like Britain.
Options going forward
In the face of these four global horsemen-like problems, there are, as far as I can tell, three possible scenarios for how we may organise our societies going forward in order to deal with the issues: doubling down on nation states, returning to multilateralism, or surrendering national sovereignty and moving towards larger regional political blocks. In the long run, clearly, the most successful way to organise politically will be the system that can effectively tackle the four horsemen problems of our time.
Doubling down on nation states means continuing as we have been doing all along with mainly unilateral state-based efforts to address global problems. This is unlikely to work for all the reasons outlined above; the chasm between what is required to fix global problems and the actual means available to nation states to do so is simply too great. If this is how the world chooses to proceed then the world does indeed face an apocalyptic future. As conditions worsen, we should expect further gains for myopic populists, more nationalism as well as protectionism, financial and otherwise. Globally, the failure to co-operate will trigger a race to the bottom, accompanied by more contagion, more conflict, more environment destruction, and more immigration.
A return to multilateralism would be welcome, but is it realistic? International cooperation is difficult at the best of times, but it is a particularly big ask at a time, when many nation states are turning inwards and becoming more protective of their own sovereignty, especially nations with Far-Right governments. Confidence in the United Nations is at rock bottom. Even a very successful organisation like NATO is under threat. The United States is increasingly looking inwards. It looks set to pull back from - or even out of - a number of multilateral institutions, particularly if Trump becomes president again.
A related problem is that the major global governance institutions - the United Nations, the International Monetary Fund, the World Bank, the World Trade Organisation - have not reformed to keep in touch with the times. It is unlikely that Emerging Markets will support global governance bodies as long as their constitutions continue to give rich countries controlling stakes. Indeed, this is why there are efforts underway to set up rival bodies, such as the New Development Bank (see here).
This leaves the third and final scenario of regional blocks, which is a kind of half-way house between nation states and full-on multilateralism. Regional integration is by no means easy to achieve as the IPSOS poll of EU members from 6 April 2024 clearly shows (picture below). What this poll illustrates is that EU countries with Far-Right governments, such as Hungary and Italy, are now the least favourably disposed towards the EU.
EU membership opinion by country, 6 April 2024 (Source: here)
Nevertheless, it is less onerous to deepen ties between nations that are part of the same region through a gradual surrender of sovereignty than to restore support for the United Nations at this time. New countries are still willing to join the EU, for example.
The greatest attraction of regional blocks is their ability to deliver economic progress through diversity. Regional integration gives access to much greater opportunities - jobs, investment, markets. Open-minded businesses will do better than narrow minded ones, because they fish for talent in larger pools. It is no accident that the trading floors of investment banks are full to the brim with bright minds from every corner of the world.
Regional blocks can also have a far greater impact the horsemen-type problems discussed above than nation states and they can be fairer to smaller nations. For example, regional bodies can introduce rules that treat all member states equally, say, with respect to climate targets or quotas of refugees.
The biggest obstacle to greater regional integration is without a doubt culturalism. Regional integration results in setbacks for some aspects of culture, but this need not be a bad thing. Languages are a good illustration. Linguists estimate that half of the world’s approximately 6,900 languages will disappear by the end of this century (see here). At first sight, this sounds horrific. Granted, a small number of these languages will die as small communities are wiped out by war or other disasters. However, the vast majority of languages are going to die completely natural deaths. As successive generations become more globalised and bilingual they will gradually lose proficiency in their traditional languages. They make this choice deliberately in order to take advantage of new opportunities created by the global setting.
I am a living example of this very thing. My mother-tongue is Danish, but I have become bilingual due to global exposures over many years, including education in many English speaking countries. Why should I insist on speaking Danish, when I enjoy English and find the language extremely useful?
The key thing about culture is to always be in touch with what it means to us personally. We need to be prepared to let go of the paranoid elements of our culture, which so often are just a legacy of a long-gone past when we lived vulnerable lives in isolated communities. Today, we are all part of one great global community. Everyone should be free to keep whatever good and useful bits of their culture they want and to ditch whatever they no longer find useful or appealing. Remember that any aspect of culture that really has genuine value will always survive.
The End