After the collapse of the Soviet Union, it seemed the New World Order would eternally favor the wealthy democracies of the United States and Europe.  After all, the superiority of the liberal market economy had been proven, and there was no compelling alternative to the ideal of democratic market societies.

Yet today Europe is in chaos, riven by economic divisions, weak growth, and a flood of immigrants.  The European Union seems to be breaking under the strain, with Hungary and other nations wanting to go their own way, and the United Kingdom about to vote on exiting.  America’s politics remain paralyzed by polarization, and we seem startled by newly aggressive actions by Russia and China.  Areas where America sought to project its influence – Afghanistan, Iraq, Libya and Yemen – have become scenes of turmoil and terrorism.

What went wrong?

The answer is that the West was unprepared for any further challenges, believing it had won the only conflict that mattered — the contest with communism.  Yet the victory over communism, like the victories over fascism and militarism half a century earlier, did not put an end to war and terror.

There seemed to be three compelling reasons to believe that “this time was different,” and that liberal market societies would enjoy a final triumph.  First, the economies of the West had led the way in developing the next phase of economic and technological growth, the “knowledge economy.”  To this day, no other regions except Japan and South Korea, now close allies of the West, have participated in a meaningful way in creating new industries based on innovation.  Thus it seemed that all other societies would also have to adopt open, free and market societies or be left ever further behind.

Second, several of the products of that innovation – the internet, smart phones, and personal computers – seemed to ensure that personal freedom would expand, as every individual was empowered to be a publisher, photographer, and communicator. The internet promised greater openness, transparency, knowledge and freedom from government control, all of which would continue to ensure the triumph of free market democratic societies.

Third, the global spread of education would insulate people against being drawn into populist frenzies and extreme ideological movements.   Rational discourse and practical reason, rather than a parade of “isms”, would henceforth guide politics and international relations.

Yet all of these reasons turned out to be false illusions that misled us and left us unprepared for the world we now face.

In practice, the “knowledge economy” was less beneficial to most people than expected.  Since the late 1980s, average incomes have stagnated in the rich countries of the West, while inequality within countries, and across the countries of Europe, has increased.  It turns out that the fruits of the knowledge economy were not automatically widely shared.  Instead, exceptional rewards went to technical, financial, and executive elites while ordinary workers went from secure and high-paying manufacturing jobs to lower-paid service jobs. Even within Europe, countries with leads in high-tech industries, such as Britain, Germany and the Netherlands, pulled away from countries that still depended more on agriculture, construction, and basic manufacturing and services, such as Portugal, Greece, and Spain. Yet at the same time, non-western countries found there was still lots of mileage in the manufacturing economy, and emerging market nations made rapid progress by focusing on manufacturing for export and meeting a booming demand for commodities.  Countries like Russia and China enjoyed fast-growing economies in the early 2000s without becoming democratic free market societies.  Combining oligarchic or state-ownership of key banking, media and commodity enterprises with private markets for manufacturing and retail operations, all under authoritarian political control, they enjoyed much faster economic growth than Europe or the U.S.  That growth was used to finance increased military strength.

Initially, the internet, smart phones and personal computers did empower individuals.  Just like printing, radio, and television – the earlier revolutions in communications – the first wave favored individuals over governments, who were slow to learn how to manage and control the new technology for their own ends.  Yet just as with other technologies, governments gradually learned to bring the new communication apparatus under their control.  Whether by limiting access, or managing content, or using electronic communications to track individuals’ activities, government has learned to turn these tools to their advantage.  Nor are they the only ones.  Private companies who control these technologies and the information they generate have vastly expanded their market power at the expense of individuals, again increasing inequality.  And the internet has proved surprisingly powerful as a tool for spreading extremist ideas and recruiting people to extremist movements across local and national boundaries.

For education, despite its rapid expansion across the globe, did not provide a shield against radical and extremist beliefs.  Quite the opposite, in fact.  Across the Arab world, as secondary and college education took off, idealistic students who learned the history of their colonial exploitation and economic lags compared to Western countries were more easily drawn to radical movements.  In Russia and China, education and modern communications facilitated the spread of the government-spun story of historical humiliations of their great nations and the need to reassert national strength.  Two “old” ideologies – Islamic jihad and aggressive nationalism – thus enjoyed powerful revivals.  Even within Europe, universal secondary and widespread tertiary education has not held back old and new nationalisms, as in Hungary, Scotland, Catalonia, Serbia and elsewhere, which have undermined the effort to build a united and multi-national European entity and even threatened to break apart individual European states.  And with rising inequality and economic frustration, other old isms, including right-wing extremism and anti-Semitism, have revived as well.

Can the West regain its advantage?   In one sense, no – for we have learned that the very notion that the West’s economic and political system is superior and something to be installed around the world by Western intervention is anathema and self-defeating, provoking the very anti-Western nationalisms and extremisms we had hoped to leave behind.  Yet the West can regain a position of global inspiration and leadership by altering our approach.

First, we must find a way to make the knowledge economy provide more inclusive prosperity.  By some combination of changes to the tax system, the welfare system, or access to technical skills and opportunities, the trend of the last thirty years – where rising productivity failed to produce a broad rise in incomes but rather enormously enriched a very few – must be reversed.  Otherwise there will be little desire for people around the world to emulate the economic system that brings such inequality.

Second, the privacy and security of the information economy must be increased, and the reach of government restricted, such that individuals can be secure and free in their sharing of information.  Only then can the internet be an effective means of individual empowerment and securing freedom.  The idea that if only the government knows everything about every individual they can spot terrorists before they act is a dangerous myth.  In fact, for example, governments knew that Ayoub El Khazzani had “ties to known hard line Islamist groups” and he was already under surveillance. http://www.cnn.com/2015/08/24/europe/france-train-attack-what-we-know-about-suspect/  Yet it took the fortunate actions of American soldiers who acted from immediate observation to prevent a massacre.  Broad-brush information gathering generally yields far too many suspects and too much data to provide immediately actionable intelligence.  Traditional police work, including searches by warrant and police surveillance, are more effective tools against terror than automatic government access to all internet and cell phone traffic.

Third, we must recognize that the antidote to radical extremism is neither education nor economic progress, but dignity.  Giving other civilizations and individuals respect and treatment as human beings deserving of all international rights – treating others as we would want to be treated ourselves—is the best way to produce rational and peaceful relationships.  From the punitive post-war sanctions and reparations imposed on Germany after WWI, to the colonial boundaries and arbitrary regimes imposed on developing countries after WWII, to the support for corrupt regimes and failures to provide adequate post-conflict reconstruction assistance, Western leaders have rarely asked – “would we want our society to be treated this way?” – instead invoking the rights of the victor to impose their will on others.

Europe and America will face many tests in the years to come:  how to reduce economic inequality, how to respond to refugee crises and waves of immigrants, how to reinvigorate economic growth, how to protect and sustain a livable environment, how to subdue radical terrorist movements, and how to manage in an increasingly multi-polar world.  To succeed in these tests and restore a leading role, Western nations will have to avoid self-defeating myths that seem to offer easy answers to difficult problems.  Instead, the West will have to work hard to create inclusive economic growth; ensure that privacy and personal security are maintained; and treat other peoples and regions with the dignity they demand and deserve.