Western prosperity won't came back any soon...

Having once built growth booming on a capitalist system, the US is now curbing it with its policies and bad decisions. Everything indicates that the US lives in the past and indulges in the denial of facts.

Last week, the US Federal Reserve (FED) decided to raise interest rates again by 0.25 percent to as much as 5 percent, despite the collapse of several US banks, including Silicon Valley Bank (SVB), as well as other problems abroad.

This staggering rise in interest rates is expected to have a negative impact on US economic growth, putting banks under even more pressure, with broader global implications. The aim of the interest rate hike is to tame the growing inflation that is currently afflicting Western countries and has slowed economic growth. Even more financial turmoil could follow as the Fed expects a further increase later this year.

This decision is a sign of the times in which we live. In the Western world, the "good economic times" are over, and have been for several years. A series of successive crises, arguably beginning in 2008, have severely damaged the structure of Western economies. They never really recovered while immensely unpopular rounds of austerity were announced, increasing wealth inequality and reducing consumption. If the global financial crisis of 2008 was a turning point, the Covid-19 pandemic was another. The boom years are over, and given the new geopolitical environment created by the US, it is questionable whether an era of stability, prosperity and security will soon return.

The current world economy is built on a neoliberal capitalist system dominated by the US and the dollar. This system, built on the economic policies of Ronald Reagan and Margaret Thatcher, consolidated its current form from the 1960s to the 1980s. It could be understood as a finance-centric model of open markets that defied regulation and promoted globalization. It was believed that ideological change could be consolidated through the export of capitalism, which was seen as the "proclamation of the gospel" to the opening communist world and was part of the process of integrating post-Soviet Russia and China into the "value system of the West."

This economic model caused great economic and social upheavals in Western countries, deprived industry of its foundations and created "regions left behind". However, the relative political stability of this unipolar system also ushered in a period of unfettered economic growth, which, apart from a mild recession in the 1990's, was an era of prosperity. This was true until everything collapsed in 2008. The global financial crisis was a systemic political and economic turning point for the neoliberal order. The result of this recession and the ensuing debt and austerity crisis meant that some countries never really recovered – such as Italy and Greece.

The effects of the 2008 recession sent political shockwaves in the form of movements that for the first time began to oppose or react negatively to the aspects of globalization. These included, most notably, Brexit in the United Kingdom and the rise of Donald Trump in the United States. These policy developments played on the reality that globalization in its current form was mainly a "net loser," and responded to global socioeconomic and geopolitical changes that undermined existing identities and a sense of security, such as the rise of China and the waning power of the United States.

If we fast-forward to the present, then this "neoliberal economic order" is probably on its deathbed. The years of Western boom enjoyed in the 1990s and early 2000s never returned, and if the past few years are any indication, they will not return anytime soon. The geopolitical climate is currently in a state where globalization is being deliberately scaled back.

The economic system that the US once built and touted as desirable in order to demonstrate the luminosity of capitalism to the communist countries is now being dismantled because it not only failed to convert "opposing" states, but, on the contrary, made them more powerful. The US now opposes free trade, economic integration between its allies on the one hand, and both China and Russia, on the other, and has no qualms about eradicating the roots of globalization. The result is less free trade, more tariffs, more sanctions, more export controls, more coercion for allies to comply with US wishes, and inappropriate investments driven by geopolitics, not market needs.

Successive US presidents have claimed that they will bring back the "good old days" and "make America great again," but the real picture looks bleak. The Biden administration's economic policies are a disaster precisely because they represent a mixture of geopolitical assertiveness, gross protectionism and catastrophic fiscal policy. Washington's decision to inject billions in economic aid to prop up the US economy, prolong a war in Europe that leads to a prolonged inflation crisis, insist on an escalating economic war with China, and then be forced to raise interest rates repeatedly even as the banks fail, is a deadly cocktail. The US has drastically reduced its options, constantly pretending that it can deal with the consequences.

The good old days of Western prosperity are over. Ronald Reagan's neoliberal economic order was once the bedrock of global growth, however unjust and unequal it was. But to be fair, since 2023, the geopolitical conditions that made this system possible no longer exist. The world has changed, and it's no secret why this had to happen. The US was not really able to stop the rise of China – though it tried its best to slow it – or deal the death blow to the Russian economy, which Washington had prematurely declared a failure. All of this suggests that U.S. leaders live in the past and in self-denial, pursuing policies that base them on their wishful thinking about how the world "should be," rather than accepting it as it really is. It is always the ordinary people who have to foot the bill.

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