The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All, by Martin Sandbu

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This extract from The Economics of Belonging. A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All, by Martin Sandbu (published in the United States of America by Princeton University Press, June 2020), is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

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For three generations after the Second World War, a particular ideal of how society should be governed anchored the most successful and prosperous countries on earth and inspired many more to emulate them. For a short, triumphal moment after the fall of communism in 1989, it even looked like a model every nation was eventually destined to adopt, and the world would be a better place for it. It is this social order that is facing its biggest challenge since 1945.

“Liberal democracy” is a common name for it. That is not incorrect, but it is incomplete, for it is an order held up by three pillars, of which liberal democracy is only one. This first pillar is a set of political principles centred on individual rights, equality before the law, and competition for political power organised through regular free elections, all scrutinised by free media and enforced by independent institutions. The second pillar is a social market economy where both “social” and “market” matter: a capitalist system, but one where competition is governed by rules in the common interest and whose growing prosperity is broadly shared. The third pillar is openness to the outside world in both political and economic terms—a commitment to gradually lower borders of all kinds between nation-states and their citizens and to realise the benefits of this social order jointly.

A broader term is simply “the Western social order.” For this way of life was created by the West, the democratic capitalist countries in which the model was consolidated after 1945, and rooted in the Western Enlightenment. At the same time, the values that underpin it are universal and not confined to the West at all. While it originated in Europe and North America, the Western model spread far beyond those regions, encompassing, for example, countries like Japan and the “Asian tigers” that followed its path of economic development. And there are important variations within “the West” defined in this broad sense. It is a long stretch from the US system of relative laissez-faire, even in the immediate postwar decades, to the Nordic mixed economies. But they are all recognisably of the same family. With their liberal democracies, regulated market economies, and embrace of globalisation, Scandinavian countries were indisputably on the Western side of the Cold War dividing line with the communist bloc.

As the Cold War showed, the Western social order has always been contested from the outside. While the Soviet Union’s demise removed communism as an ideological rival, today China’s authoritarian state capitalism consciously presents itself as an alternative to the Western model of social organisation—and not without success, even though China’s own spectacular rise owes a lot to the country’s having created limited copies of the Western model’s second and third pillars. But national leaders who might once have aimed to join the ranks of the rich liberal democracies have understandably had second thoughts about the West as a model after the disaster of the global (but in origin Western) financial crisis of 2008.

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A social order can survive without being the uncontested winner on the international stage. Losing the support of one’s own people, however, is an existential threat. That is what happened in 2016. Fringe antisystem forces had been on the rise for years, but two political earthquakes that year marked the first time since 1945 that such forces won decisive electoral victories in any major Western country. And not just any country, but the two powers that had done the most to set up the postwar order in the first place. The British referendum to leave the European Union showed a major European nation turning its back on the European project, which had gone further than any other part of the world in realising the West’s borderless, rules-based ideal. Then Americans elected Donald Trump as their president—an authoritarian who hides neither his racist-tinged nationalism nor his contempt for democratic principles and the rule of law—and thereby repudiated a world order the United States had shaped and led in its own image. Through these choices, voters at the core of the Western system showed that they no longer feel they belong to it. This end of belonging was a colossal fall from grace for the Western model, and one that has energised illiberal antisystem movements on the extreme fringes of politics in almost every Western country and beyond.

These forces have a straightforward take on two of the Western model’s three pillars: they reject political and social liberalism as well as globalisation as ends to be pursued. That is what has led to the comparison with the 1930s and raised fears that democratic and open societies could again descend into fascism at home and close themselves off from the integrated global economy abroad. Admittedly, some supporters of Brexit and Trump style themselves as liberal globalists—they claim to want more or better trade deals than the established elites have achieved. In practice, however, what both groups have used their power for is to increase trade frictions, raise barriers to economic exchange across borders, and challenge the global rules—even the notion that there should be global rules—that make commerce between countries easier.

The attitude to the remaining pillar—the postwar social market economy—is more complicated. Ultimately it is also the most consequential, for, as I will argue, the other two pillars of the Western order will stand or fall depending on whether it can deliver on its economic promise.

The Western-style social market democracy that thrived in the postwar decades was an unwritten but firm social contract. One of its vital elements was economic solidarity: a promise that everyone would share in the fruits of growth. Common to most of those rallying behind illiberal or nationalist forces is their sense that the economy has changed for the worse in general, and for people like them in particular. The reason why the slogans about restoring past greatness—“ Make America Great Again” and “Take Back Control”—have such appeal is that the economic and social order of the postwar decades is remembered not as something to be rejected but as something to be restored.

Behind the illiberalism and nationalism, therefore, there is a prior economic claim. This claim is that the economic opportunities on which previous generations thrived have dried up, and those that still exist have been closed off and reserved for an elite to which “normal people” don’t belong. Those turning against the Western order are those who feel left behind in it, but not just that: they feel left behind by their own—betrayed by the elites who constructed the system and were entrusted with making it deliver.

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I call this “the end of belonging” because the notion of belonging captures the psychological and sociological, and in the last instance political, fallout from economic change. The sort of economy common to all Western countries in the decades after 1945 was one in which members of virtually every social group could aspire to an attractive place for themselves. Jobs were plentiful and offered increasingly adequate incomes and, just as importantly, status and dignity (which was gradually extended to previously marginalised people). Most people could come of age expecting that a willingness to work and get along would be rewarded with material comfort and security, as well as with social respect. Incomes were growing closer together, both between social classes and between geographic regions, which narrowed differences in how life was lived. The populations of Western countries could justifiably see their national economy—and, by extension, their national society— as one where they all belonged, and belonged together.

In the first part of the book, I tell the story of how this togetherness unraveled because of technological changes and domestic economic policy choices, rather than because of economic openness. While much is made—including by friends of the liberal political order—of “hyperglobalisation” and such “shocks” as the rise of China, I will argue that globalisation is too often used as a scapegoat. But before we get into the causes of the economic changes the Western world has undergone in the last four to five decades, we should contemplate their most important consequence. This is that the Western social order no longer fulfils its promise of an economy that offers a (good) place for everyone. And just as such an economy used to sustain a psychological, sociological, and political togetherness, so the end of economic belonging has undermined those types of cohesion.

Large numbers of people in the West who could previously expect decent earnings in secure jobs are instead confronted with, at best, precarious employment that pays them too little to provide for themselves, let alone for a family, without serious economic stress. Economic insecurity has made a large group of people dependent on others, risking exploitation and abuse. And it is becoming increasingly clear that this particularly afflicts certain places and regions, destroying the communities that call them home. When, at the same time, the economy provides other groups with more prosperity and richer opportunities than ever before, it is natural for those who are excluded from them to feel aggrieved, and to see the economy and the rules that govern it as rigged for the benefit of others. An economy—and a politics—that benefits some people and places while locking others out of prosperity is what the end of belonging means.

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In this sense there is both truth and logic to the populist onslaught on Western institutions and the mainstream parties that built them. The truth is that a large group of people have indeed been economically left out or left behind; as I show in the pages that follow, Western economies have turned into something that many people legitimately feel they no longer belong to. The logic is that the end of economic belonging is used to reject the postwar Western order in its entirety. The populist antisystem offer is this: since the system and its elites failed you in upholding the economic part of the bargain, you should now throw them and their whole social contract out—including its social and political liberalism and its openness to the wider world.

That logic is flawed insofar as the proposed solution will not solve the problem. But rather than dismissing it altogether, the argument of this book is that we should turn the logic on its head. Since the Western order is under threat from the erosion of one of its pillars—an economy to which everyone belongs—rebuilding that pillar in a way fit for today’s social and technological conditions holds the promise of restoring support for the Western model as a whole. What we need, in short, is a new economics of belonging.

Find out more about The Economics of Belonging. A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All, by Martin Sandbu (published in the United States of America by Princeton University Press, June 2020)

Related Topics

Tackling Covid-19  Income Inequality  New societal contract  International Co-operation


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Martin Sandbu

European Economics Commentator, The Financial Times

Martin Sandbu is the Financial Times European Economics Commentator. He also writes Free Lunch, the FT's weekly newsletter on the global economic policy debate. He has been writing for the FT since 2009, when he joined the paper as Economics Leader Writer. Before joining the FT, he worked in academia and policy consulting. He has taught and carried out research at Harvard, Columbia and the Wharton School, and has advised governments and NGOs on natural resources and economic development. He is the author of three books; on business ethics, the euro, and on "the economics of belonging". He was educated at the universities of Oxford and Harvard.

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