Is It The Beginning of An End of The Neoliberal Era?

The corona crisis is becoming an integrated crisis from health to economic and inducing a new beginning within the system.

End of Neoliberal Era

  Foreign Affairs

People throughout the world are jostling with many ideas during the present pandemic. One of the main concerns of the people is: what is going to happen once the pandemic is over? Will things be as usual? The system will work as it used to function before the pandemic or will there be a radical shift in the socio-economic and political discourse. All of these concerns are approached by people in a different manner. And, that is bound to happen because the socio-economic background that we all come from induces us to think differently.

In an interesting article, “The neo-liberal era is ending, what comes next”, Rutger Bregman writes that “There are those who say this pandemic shouldn’t be politicised. That doing so is tantamount to basking in self-righteousness. Like the religious hardliner shouting it’s the wrath of God, or the populist scaremongering about the “Chinese virus”, or the trend-watcher predicting we’re finally entering a new era of love, mindfulness, and free money for all. There are also those who say now is precisely the time to speak out. That the decisions being made at this moment will have ramifications far into the future. Or, as Obama’s chief of staff put it after Lehman Brothers fell in 2008: You never want a serious crisis to go to waste.”

But the silver lining is that changes are immanent and imminent. Crisis, be it economic, like the 2008 financial melt down or the present pandemic, which eventually is leading into an integrated crisis from health to economic, sprouts a new beginning within the system. How the present pandemic will induce such a beginning, we will have to wait and make it happen with all our efforts.

The economic paradigm professed and advocated throughout the world from federal governments to provincial and even to city governments was the neo-liberal: laissez faire model. Minimum government and maximum governance was the dictum of rule. A whole bunch of bureaucrats from the Indian bureaucracy were sent to such schools globally to become ardent supporters of this model.

One of the foremost fallouts of this model has been the complete unsustainability of the system. The 2008 crisis led to the development of the ideas of sustainable development goals. The 17 SDGs, out of which nine goals directly are related to address inequity in the system and the society by large, have not been able to address the core issues. During the discussion in UN Habitat III at Quito on the SDGs, John Closs, the executive director of the Habitat kept on reminding that one has to go back to the basics of planning. The free market economy and treating cities and entrepreneurs will not make the system sustainable, rather it will increase the vulnerability of the cities and the people.

The present pandemic has further exposed the un-sustainability of the system. In India according to the CMIE data 27 million youth in the age group of 20-30 years lost jobs and the unemployment rate is almost 27 per cent. In United Kingdom according to the British central bank, England is on the eve of the largest recession since the year 1709. In US in the space of three weeks, 17 million people applied for economic impact payments. In 2008, financial melt down, it took two whole years for the country to reach even half that number. This explains the widespread impact that the pandemic is having across the world, its people, economy and their livelihoods.

The drive towards privatization has got exposed during the present pandemic. The private health infrastructure was hardly seen across the globe mitigating the pandemic crisis of Covid-19. Spain and a few other nations had to nationalize their health care system. Even in India, it is the public health institutions and the states that rely more on them that were able to meet the crisis for the moment. The vibrant Gujarat model that had crumbled its health infrastructure faltered badly. In such a scenario where the governments were not seen as investors, across the globe the nation states have induced in an economic stimulus in their economies.

The five G 20 countries with largest Covid-19 stimulus programmes are as:
1. United States: $2.3 trillion (11% of GDP)
2. Germany: $189.3 billion (4.9% of GDP)
3. China: $169.7 billion (1.2% of GDP)
4. Canada: $145.4 billion (8.4% of GDP)
5. Australia: $133.5 billion (9.7% of GDP)

Does it mean that the role of the nation state has once again been reinforced as a prime investor and the neo-liberal era is meeting the beginning of it end.

But look at the Indian story. Instead of following the trend of infusing liquidity into the market and giving cash to the people to buy goods, the stimulus packages announced by the finance minister is nothing but a big fraud committed by the prime minister and the finance minister in order to veneer their blunder and accept their failure.

The demand in the economy has fallen massively owing to the lockdown. The daily wager and even the salary earners who have been laid off are in no capacity to buy. The middle classes are also confined to their homes and are not buying except booze and food. The hospitality, entertainment and transport etc., are closed.

The basic premise of the ‘stimulus’ of awarding loan to the entrepreneurs and other sections has just not taken off. For the simple reason there is no security in the economy. Even if loans are borrowed there is no guarantee that they will be paid back. Moreover it is delinquency of the buyer and for that the purchasing strength of the buyer must be enhanced. But instead the government has harped on facilitating loans, which are not going to take off.

A lot many economists including those who are not from the Left have argued for a Keynesian pump in the economy to ensure that the demand gets generated. However, the government chose a different path. Why ? Some of them are of the opinion that it is the gibberish mindset of the leader of the government, which was initially felt during the demonetization and another round of it happened during the lockdown followed by the ‘stimulus’ package. However, Prabhat Patnaik makes a distinction between the two decisions. The demonetization could be because of a foolish idea, but the present package to not to infuse currency in the market and thus create a demand thereby increasing the fiscal deficit is actually linked to the credit rating by the globalised finance capital. The Modi government does not want to annoy the foreign finance capital by increasing the fiscal deficit with the fear that it will fly off. Though the reality is that the global finance capital is moving out and what is required is more regulations.

In such a scenario where the government is committed to appease the corporate by even allowing dilution of the labour laws the legitimacy of the government is questioned. In order to bypass from the real issue of failure of the government in the country to provide any relief to its people, the government is harping on greater authoritarianism and spreading the communal virus to legitimize its presence.

Whether it is the beginning of the end of the neoliberal era would be quite premature to say, at least in the Indian context!

Tikender Singh Panwar is former Deputy Mayor of Shimla and advisor to Samruddha Bharat Foundation.