Governance risks in a post-truth world

Facts have become a casualty in the deeply polarised United States and authoritarian China, putting the rules-based order at serious risk

There is a growing governance malaise in the world. The United States (US) and China — the two growth engines of the world, accounting for over 40% of its Gross Domestic Product (GDP) — are gripped by disparate but seemingly unresolvable governance challenges with major consequences for the global economy and world order.

Xi Jinping took decisive steps to concentrate power, purged rivals on corruption grounds, and introduced stronger controls on civil society to silence any dissent(AP)

Everyone comments on the extreme level of polarisation in the US that is now poisoning the country’s social fabric. People see the “other” as an enemy. Television channels serve different belief segments, and social media accentuates and propagates divisive rhetoric. Extreme and false views designed to stoke hate are commonplace. In fact, truth itself is under attack. Facts are contested. In the past, different sides had different narratives around facts, now the fact itself is contested. Half the population does not believe Joe Biden won the US presidential elections in 2020 despite multiple court verdicts confirming his victory. Many people are not sure that Capitol Hill was attacked by unruly mobs on January 6, 2021.

A lie is defined in relation to a truth. However, when the truth itself is contested, what is a lie then? If the truth itself is challenged, then the integrity of institutions required in a democracy for governance faces a major credibility challenge. When the US Supreme Court opines on some of the cases against former president Donald Trump, the judgments, for large parts of the population, will not be acceptable because they don’t accept the facts on which these are based. The basic edifice on which social contracts are anchored does not hold any more. When this occurs within the global hegemon, then the rules-based order comes under major stress. The global democratic governance model is damaged, with all its allied consequences.

China is facing a more typical governance challenge characteristic of authoritarian regimes under stress. All authoritarian regimes control the dissemination of data and information. China has a unique authoritarian system, having institutionalised a peaceful transfer of power every 10 years. Within the sacerdotal of the Communist Party, there was sharp contestation for power. But to the lay population, this was opaque and not disruptive. Competitive power centres allowed information to flow up to the party leadership. Much has changed under Xi Jinping. He took decisive steps to concentrate power, purged rivals on corruption grounds, and introduced stronger controls on civil society to silence any dissent. The purge extended beyond political rivals and included CEOs of technology companies and even film stars. He challenged America’s hegemony with the Belt and Road Initiative. He sought primacy in the Pacific with a muscular foreign policy, putting China at odds with Japan, Australia, India, the Philippines, and Vietnam, and isolating the country. He has now breached the 10-year limit and has arrogated all powers to himself.

He has miscalculated by overestimating Chinese strength and American weakness. The ensuing backlash — in terms of tariff walls, bans on Chinese goods and products, and western companies shifting away from China — has been consequential. Its export-led manufacturing economy has been hit. While globalisation and interlinked supply chains continue, there is a dependence anathema in the western block, and many countries are encouraging their companies to unwind their China dependence. To add to this, Covid was very poorly handled and caused a sharp slowdown in the country’s economy and serious hardship to its people. Authoritarian regimes cannot share such bad news internally.

So, China has started suppressing data on youth unemployment, among other things, and now, the credibility of the GDP number itself is suspect. When data on core metrics like GDP growth are not believable, investment decisions are affected. Thereafter, typically, even the information that reaches the top political leadership is massaged. Everyone hides bad news (the typical problem of killing-the-messenger syndrome). This starts impeding economic decisions as they are made on flawed data. The system clamps down, the economy starts to falter, and controls increase. This is when capital and talent start fleeing the country, and the dynamism of the economy gets affected. Thereafter, industrialists close to the regime, who can influence decisions, benefit while the general population suffers.

There are three obvious implications of this twin governance challenge to the world. The first is the moral authority of the US on the global stage gets weaker, reducing its soft power despite a robust economy. The legitimacy of its vital institutions comes under attack, damaging its ability to be an effective spokesperson for liberal values and a rules-based order. Second, the actions in China provide a licence to a growing group of authoritarian regimes (Russia, Iran, and North Korea) to close ranks and feel emboldened to suppress democratic institutions. The third issue is the impact on the global economy. China's slowing down is not helpful for the global economy. Even today, China accounts for 17% of the global GDP, 13% of consumption and 31% of manufacturing. The rest of the world would like the country to play by global rules — buy more, subsidise and dump less. Yet it does not want the Chinese economy to slow down and stutter. German automakers, French luxury companies, and many others are heavily dependent on the China market. The US and the rest find their supply chains still pass through China. China has also built up a dominant position in producing many vital products and has a dominant position in mining rare materials. All this is at risk and the reset will take time, slowing global economic growth.

While India is among the better placed countries in this global governance turmoil, it is not unaffected. Most at jeopardy is the Indian motto of satyameva jayate (truth alone triumphs). Globally, truth has not faced such a strong attack.

Janmejaya Sinha is chairman, BCG India. The views expressed are personal