SPIEGEL: Professor Fukuyama, you are best known for your essay "The End of History," in which you declared that, after the demise of the Soviet Union, liberal democracy had emerged as the triumphant global model. Now, your latest research claims that the flaws of capitalism and globalization could endanger this democratic model. How do you explain this shift?
Fukuyama: Capitalism is the wrong word to use here, because there is not a viable alternative to capitalism. What we are really talking about is just economic growth and the development of modern economic societies. A combination of factors is beginning to challenge their progress in the United States. We have had a lot of technological change that substituted for low-skill labor and made many people in Western democracies lose their jobs.
SPIEGEL: Which is why countries such as the United States or Britain wanted to turn themselves into "service-oriented" economies.
Fukuyama: We have unthinkingly embraced a certain version of globalization that assumed we had to move very quickly into this post-industrial, post-manufacturing world. Doing so, we forgot that the whole reason real socialism never took off in the US was the fact that the modern economy seemed to produce middle-class societies in which the bulk of the population could enjoy a middle-class status. They worked in industries that were abolished in our countries and transferred to countries like China.
SPIEGEL: Even if members of the middle class held on to their jobs, they saw their income stagnate or even decline, while a few of globalization's winners at the top reaped outsize rewards. The level of income inequality in advanced nations is greater than ever before. What effect does that have on our societies?
Fukuyama: It is not good for democracy. If income is relatively evenly distributed and there are not very sharp differences between rich and poor, you have a greater sense of community. You have a greater sense of trust. You do not have parts of the community that have superior access to the political system that they can use to advance their own interests ...
SPIEGEL: … all of which undermines the democratic process.
Fukuyama: What you are going to see in a democracy with a weaker middle class is much more populism, more internal conflict, an inability to resolve distributional issues in an orderly way. In the United States right now, you do have this return of populism. It should be on the left, but actually most of it is on the right. If you talk to Tea Party members about their feelings regarding the government, they are very passionate. They hate the government. They think they have been betrayed by elites.
SPIEGEL: Americans, however, are beginning to discuss the problem of social inequality much more openly.
Fukuyama: They are slowly beginning to realize it. The recent public focus on inequality and the Occupy Wall Street movement are harbingers of change in that direction. The trouble is that in the United States it is extremely difficult to mobilize people around pure class issues. President Barack Obama was ostracized as a "European socialist" when he brought up the idea of higher taxes on the rich. These class debates are historically unpopular -- except for a very brief period in the 1930s during the Great Depression.
SPIEGEL: The latest financial crisis was often compared to the Great Depression: Why did we not see another case of the left wing rising up against the rich?
Fukuyama: I am at a loss, too. Where is this uprising from the left? This is a crisis that began on Wall Street. It really was rooted in the particular American model of liberalized finance. It hurt ordinary people tremendously, and it benefited the richest part of the country -- the finance sector -- which came through the crisis very well, thanks to government bailouts. You would have thought that this would pave the way for a rise of left-wing populism as seen in the 1930s. A Tea Party on the left, so to speak.
SPIEGEL: Could the Occupy Wall Street movement fill this void on the left?
Fukuyama: I really do not take this movement seriously, because its social base is extremely narrow. It consists mostly of the same kids that were protesting in 1999 in Seattle against the World Trade Organization -- anti-capitalists. The big problem sociologically for the left in the United States is that the white working class and lower middle class, that in Europe would be reliably social democratic in their political behavior, tends to vote Republican or is easily brought into the Republican camp. Until the Occupy Wall Street people can connect up with that demographic group, there is not going to be a big left-wing populist base of support in the US.
SPIEGEL: Has the crisis simply not been deep enough to achieve that?
Fukuyama: Ironically, because the Federal Reserve and the US Treasury acted to support the financial sector, the crisis did not develop into a deep depression with unemployment up to 20 percent like in the 1930s. Back then, President Franklin D. Roosevelt could restructure the big banks. I believe that the only solution to our current problems is to restructure all these big banks, Goldman Sachs and Citigroup and Bank of America, and turn them into smaller entities that could then be allowed to go bankrupt. They would no longer be "too big to fail." But this has not happened so far.
SPIEGEL: One could also make the case that President Obama was simply not as tough as Roosevelt.
Fukuyama: Obama had a big opportunity right at the middle of the crisis. That was around the time Newsweek carried the title: "We Are All Socialists Now." Obama's team could have nationalized the banks and then sold them off piecemeal. But their whole view of what is possible and desirable is still very much shaped by the needs of these big banks.
SPIEGEL: In other words, Obama and his influential advisors, like Treasury Secretary Timothy Geithner, are themselves part of the "1 percent" that the Occupy Wall Street movement rails against.
Fukuyama: They are obviously part of the 1 percent. They socialize with these Wall Street gurus. Goldman Sachs boss Lloyd Blankfein met with Geithner many times during the crisis. Such close contact clearly influences the world view of the White House.
SPIEGEL: But would you seriously argue that Republicans are any less close to Wall Street?
Fukuyama: Oh no. Republican politicians are completely bought by Wall Street. But the real question is: Why do their working class supporters continue to vote for them? My explanation is partly this deep distrust of any form of government that goes back very far in American politics, and is today reflected in political figures like Sarah Palin, which holds against Obama primarily the fact that he went to Harvard. There is a kind of populist resentment in US politics against being ruled by elites.
SPIEGEL: Even the Tea Party movement is largely financed by billionaires who represent everything regular Tea Party members are opposed to.
'Tea Party Activists Mobilize Against Their Own Economic Interests'
Fukuyama: The Tea Party is a genuine grassroots movement, so I do not buy into these conspiracy theories that rich billionaires initiated it. When you go to one of these rallies of Ron Paul supporters, they are very passionate. They all tend to be young, and they have just got this libertarian idea in their minds that the government is really the source of all of our problems. So I think the convictions of Tea Party activists are sincere, they are not manipulated by billionaires. But it is true that they mobilize against their own economic interests and for the interests of elites they should despise. I still do not fully understand why they do that.
SPIEGEL: Why can't Obama reach these frustrated people?
Fukuyama: The president never annunciated a vision of a different kind of economic order that did not just look like a return to a kind of classic big spending, liberal Democratic formula. The Democrats have never articulated an economic philosophy that is not just the return to the 1970s, big government and so forth, or the position of the labor unions which is very hostile to globalization.
SPIEGEL: What else should he do?
Fukuyama: I actually think that the German model should be a very interesting one from an American perspective, because Germany is still the second-largest exporter, but has done a much better job in protecting its manufacturing base and its working class compared to the United States. Somebody needs to articulate a strategy in the US that will say our goal is not to maximize aggregate income. It is to protect the middle class through an engagement with the world with globalization, but one that benefits the broad mass of people. No Democrat has really been able to do this.
SPIEGEL: Do you want the American left to draw lessons from former German Chancellor Gerhard Schröder's "Agenda 2010," a controversial package of labor and welfare reforms which overturned the classic social democratic model?
Fukuyama: What the Social Democrats in Germany have done is increase the degree of flexibility in labor markets and make the German welfare state more friendly to capitalist competition. The old traditional agenda that we are just going to have more and more social protection no longer rules in Germany, and that is a good thing. Part of the problem in Europe is that similar reforms have not happened in France and Italy.
SPIEGEL: Would that protection of the middle class include a new form of global protectionism?
Fukuyama: We should never have permitted the Chinese to deindustrialize a large part of the world. The Chinese have managed to play one Western country against another, stealing their technology basically. They succeeded because everybody in the West has got this short-term view saying: "I may be clobbered by the Chinese down the road, but if I do not make my money now, somebody else will get in. So I make business with them even if they rip me off." This view is very short-sighted. We should have been much tougher with China.
SPIEGEL: Could that trend still be reversed?
Fukuyama: It is too late, at least in the United States. We have lost all crucial manufacturing industries to China.
SPIEGEL: A feeling of helplessness also prevails in Europe. Every time EU politicians try to present new solutions to the euro crisis, they fail to convince the financial players around the world. Is political leadership still possible, given the outsize power of global financial markets?
Fukuyama: The political leadership problem stems not simply from the pressure by the markets. All modern democracies have a disease, which is that the democratic process tends to be captured by well-organized groups that are not representative of the general public. This is the whole problem with Greece. The pharmacists and the doctors and the civil servants and the architects, and every other social group in that country, has organized itself into a closed corporation that controls prices while largely avoiding taxation. They make a fortune, but the national bankruptcy is bound to happen.
SPIEGEL: Unelected technocrats and advisers from outside are now being brought in to reform the Greek system. What does that mean for democracy?
Fukuyama: If I had to bet my own money on this, Greece is going to leave the euro, because ultimately any outside intervention is going to be regarded by the Greek public as a non-democratic imposition of policies that they do not want. Greeks are just never going to behave like Germans, right?
SPIEGEL: Can Europe, in its desperate attempts to rescue the euro, still be democratic?
Fukuyama: The entire European project was very elite-driven from the beginning. The evidence of this was every time a country held a referendum where they voted against signing on to further EU regulation ...
SPIEGEL: ... that referendum was simply repeated.
Fukuyama: The EU elites said: "Oh, you just got it wrong this time. We will keep voting until you get it right." Virtually every European country now has got a right-wing populist party. They are anti-EU, anti-immigrant, and it has exactly the same cause, because there is a perception that the elites in Europe do not really address their issues.
SPIEGEL: Authoritarian systems, on the other hand, appear to be getting more and more popular. When German businesspeople travel to communist China, for example, they are enamored with the system there. They rave about how quickly important decisions can be made.
Fukuyama: I hear that from American businesspeople too. The Chinese system is particularly striking when you contrast it with Europe and the United States where you currently just cannot get a decision made.
SPIEGEL: So authoritarian China will emerge as the new global model -- which would totally contradict your thesis from "The End of History" that democracy has become the default option around the world.
Fukuyama: No. China is never going to be a global model. Our current Western system is really broken in some fundamental ways, but the Chinese system is not going to work either. It is a deeply unfair and immoral system where everything can be taken away from anyone in a split second, where people die in train accidents because of a rampant lack of public oversight and transparency, where corruption rules. We are already seeing huge protests in all parts of China ...
SPIEGEL: ... which Communist Party officials fear are reminiscent of the Arab Spring.
Fukuyama: When its leadership stops delivering the current level of economic growth, it has got this huge moral vulnerability. Liberal democracy still really is the only game in town worldwide, in spite of all of its shortcomings.
SPIEGEL: Professor Fukuyama, we thank you for this interview.