Some of us were talking the other day about the horrors of the IMF prescriptions and the pain they can cause to the nations that are obliged to suffer them.
“Nevertheless,” stated a highly knowledgeable finance man, “There really is no other way to run an economy, is there?” He was referring, not to the fact of the fiscal sins that had driven the country to seek IMF assistance, but to his unswerving belief in the free market neo-liberal principles of what is called the Washington Consensus, and which underpin the reforms stipulated by the IMF. He, like many others, including the entire economic team surrounding our present Prime Minister, believe these to be the only valid economic principles. Something of the same total faith in free market neoliberalism and blind rejection of any other system also underlies Dr Shahid Mehmood’s piece “Calculus of capitalism” in The Friday Times of July 5-11, 2019, in which inter alia Dr. Mehmood extols the virtues of Bill Gates, and denigrates the French economist Thomas Piketty. We shall return to both Gates and Piketty in another essay.
It seems that the memories of economists and finance gurus are short. Back in the 1960s and ‘70s, the received economic truths were quite different. The economic systems governing the world included the rigidly planned economies of the Communist bloc of countries, which, whatever their eventual failures, built excellent health, education, and welfare systems. They included the outstanding welfare states of Western Europe, and a variety of developmental planning models – some more successful than others – in what were then called Third World countries.
That post-World War II period, beginning in 1945, was known by the French term Les Trente Glorieuses,” the glorious thirty years”, as it saw strong economic growth right across the west, driven by Keynesian demand management principles and welfare economics. Everywhere, it was benevolent state intervention, and not so-called free market forces driving economic decisions. So much for our economists of today!
In 1976, the Chicago School economist Milton Friedman’s free-market ideas began to gain currency. In opposition to the interventionist Keynesian and socialist models, Friedman advocated the revival of old-fashioned laissez faire capitalism. Britain elected Margaret Thatcher as the prime minister in 1979. The United States followed in 1981 with the election of Roland Reagan as its president. During the 1980s, the Thatcher/Reagan free market prescriptions and ideological aggressiveness were sensationally successful in generating hitherto unimagined levels of wealth around the world, catalyzing the downfall of the Communist ‘Evil Empire’ and creating the triumph of globalizing corporate capitalism. What came to be called the Thatcher-Reagan era reduced the role of the state by dramatically easing regulatory systems and reducing taxes. Another process was also set in motion, driven by the developments in communication technology, the process of globalisation.
hina abandoned the Mao-era system of governance with a heavy role of the state in political and economic governance and emphasis on income and social equity under Deng Xiaoping. It opted for the western system of economic governance, joining the IMF, the World Bank and, most notably, the World Trade Organization, the WTO. This was the neoliberal era in which a globalised world emerged, with manufacturing value chains and financial systems spreading across the planet.
Globalisation, with the East Asian tiger economies leading the way, lifted hundreds of millions of people out of poverty and deprivation and onto a more human plane of subsistence. It generated previously unimagined levels of prosperity and wealth – and also extraordinary inequality, not just between countries or regions, but between individuals. Pakistan, it should be noted, was one of the countries that pathetically failed to find its niche in the global value chain and thus remains a dependent economy, rushing for assistance to the IMF and the Gulf monarchs and genuflecting at the feet of the likes of Donald Trump.
It seems that the memories of economists and finance gurus are short. Back in the 1960s and ‘70s, the received economic truths were quite different
And this brings us to the present era. As with the end of Les Trente Glorieuses, it took a few years of uncertainty before a new ideological movement emerged. That happened in 2016 with the election of Donald Trump in the US. To this, one must add the xenophobic Brexit referendum in the UK and the emergence of politicos like Nigel Farage and Boris Johnson. The fact that populist and nationalist parties around the world are already taking their cue from Mr Trump suggests that a cycle of emulation is already underway. It is now standard practice for politicians such as Victor Orban in Hungary to imitate the Trump playbook: condemning “globalism”, accusing the media of spreading fake news, mocking the “politically correct”, scorning international organizations that attempt to deal with problems such as climate change or the resettlement of refugees, and promoting Islamophobia and other racist ideas. The dominance of figures like Narendra Modi in India, Benjamin Netanyahu in Israel, Vladimir Putin in Russia, and one could think of numerous other examples, signals the rise of chauvinist nationalism and the collapse of globalisation. Reklama: 2020 sb lizingas lojaliems automobiliui, asmeniniai finansai, greitieji kreditai internetu, Swedbank, Inbank, Šiaulių bankas, Medicinos, Luminor ir SEB bankų vartojimo paskolos nedirbantiems su užstatu arba vekseliu, pinigai už procentus be kredito patikrinimo, refinansavimas ir pan.
If this interpretation of recent world history is correct, when does the next phase start? Americans have always believed that they would lead the world in every field. That confidence has been challenged by the rise of China as a competitor and stymied internally by the likes of Donald Trump. Trumpism and all that it has spawned around the world could last for thirty years and result in massive instability and the collapse of any kind of principled world order. Liberal thinkers believe that among the world’s great powers only American has the attributes to lead the globe and get it to move in the right direction. For the present, under Trump, it is unswervingly leading to darkness and disorder.
So, let us return to our starting point of economic thinkers who strongly believe in the virtues of neoliberal free market capitalism as the only valid economic system. In the first place, the Keynesian, welfare, and socialist models preceded the neoliberal world order and enjoyed enormous success. The combination of the free market with contemporary technology later made globalisation possible, lifting much of the world out of destitution and generating hitherto undreamed of levels of wealth, such as that of Bill Gates, or of the Ambani Brothers, the tower of whose residence rises out of the squalor of the Mumbai slums.
But all that could come to grief, and the world could be plunging into a kind of Black Hole, a new universal disorder, accompanied by closed borders, racism, violence, warfare and environmental collapse.