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World
Economic Forum Anguish of
neo-liberalism: new ideas and fresh approaches
By Dr Noor Fatima
This year the
World Economic Forum at Davos ends with renewed commitment to global
challenges particularly to the UN Millennium Development Goals and as per
UN chief Ban Ki-moon said: ?Too many nations have fallen behind,? ?We need
new ideas and fresh approaches?. Earlier The WEF Report- Risks 2008,
meeting has highlighted the need for a new philosophy and rigorous action
in a number of problem areas. It expresses concerns that the current
liquidity crunch will lead to a US recession in the next 12 months and
calls for a new analysis on systematic financial risk in response to the
revolution in financial markets over the last two decades.
The report also warned
about the anticipated food security as a major economic problem in the
coming few years. Major Global Risks - 2008 focuses on four emerging issues
which will impact the world economy in the coming decade ahead which are,
(a) systemic financial risk, (b) food security, (c) supply chain
vulnerability, and (d) energy deficit. The report recommended that in
order to gain the benefits of globalization, improved economic governance
is imperative. Despite, this realization there are inherent constraints of
capitalism as reiterated in the Devos meeting by world leaders and
Industrialists. World Economic Forum is always a good celebration of
global capitalism with the assurance of neo-liberalism?s indelible,
smouldering mark on the face of the world. Moreover, it would work for the
economic gains through technological innovation, competitiveness, and
market economy as a solution for the emerging economic problems.
In the first
illustration the question arises whether this predicted crisis of economic
stagnation is fabricated to fit a theory for the projection of
?neo-liberalism? or is it actually a historically determined fate. To
understand this concept we have to trace the brief history and actuality
of neo-liberal economy.
Now
neo-liberalism has emerged as a powerful modern ideology during the last
two decades. The economic, political, and sociological debates are
devoting increasing attention to its ideological foundation, theoretical
basis, and its practicability as a worldwide phenomenon. These ideologies
have taken a place with a view to reinvent or revitalize the economic
governance in the developing countries.
Neo-liberalism is a set
of economic policies that has become prevalent during the last two decades
in the world as an extension and validity of? Washington consensus? Of
John Williamson. When we say "Neo" it presents a new brand of
liberalism which originally derived from, ?The Wealth of Nations? by Adam
Smith, in 1776. Adam Smith believed in lesser intervention of the
government in economic issues.
Restriction on import,
export and tariffs are the deriving concept of liberal or free economy,
which for capitalists means enhancing their profits. Imperialism was
thought to be over since WW-II, however, it continues in the present form
of neo-liberalism.
The issues raised from
the debate were, (1) neo-liberalism has encompassed all sectors of the
public sector to refrain it from economic governance, and to restructure
the economy to incorporate business-friendly ventures such as
privatization, deregulation, and liberalization. (2) This is opposite of
the post war ideology of a welfare state, development planning and an
expansive public sector in the developed and the developing nations. (3)
This basic shift in economic governance demands the state to be in line
with the neo-liberal ideology of market superiority, non-intervention,
free trade, and exchange rates. (4) Structural Adjustment is the classic
example of neo-liberal propensity in South Asian as well as Latin American
countries.
Despite the U.S. social
Scientist, Francis Fukuyama?s assertion that End of History has arrived
with the success of neo-liberalism, whether there is
economic or social success of capitalism in the underdeveloped
world or not. Actually, the theory was not deliberate on the success or
failure of the capitalism but victorious ideology i.e. the ability of the
world?s ruling class to wreck, suffocate, corrupt, or dishonour any
constructive alternative ideology. If there were no alternatives to
capitalism, everything would stay the same whether capitalism was good or
bad. But the case is not like that. There are questions of alternatives? In this sense, we are
now even closer to the end of history than in 1989. The fact remains the
economic failure of neo-liberalism will not lead to mechanically
disintegrated, hegemonic ideology, because the fortuned class of today?s
capitalist world will not resolve the system?s objective contradictions,
as they are capable of paralyzing any attempts to solve these problems.
Nevertheless, there is a full realization that neo-liberalism is neither
the natural human conditions nor a divine revelation. Therefore, it can be
challenged and new alternatives can be found due to its own failures.
When we trace history,
and go back to 1940s and look at the toolkit of development strategies, we
would not find any policy/ ideas to present a neo-liberal ideology. At
that time, it would have been very hard to present such ideas and get
their support from the recipient countries. The concepts such as welfare
state, social Christian democrat, etc are found instead. Then Bretton
Wood?s Institutions, (IBRD& IMF) came into being in 1944. They were
seen as a progressive institution, established for the reconstruction of
the war torn areas, closely linked with the ideas of Keyne?s thoughts. In
the beginning they did not have any role to control over the individual
government?s political and economic decision, nor could they intervene in
the economic governance of any country.
The objectives,
theories, and models of the development doctrine of 1950s used for
measuring performance shows that the role of the foreign aid was focused
on achieving development and growth. It does not show any kind of
intervention in the economic and political governance of the recipient
county. At that time the aid was seen as an attractive instrument of
growth because it was believed that the government could plan a successful
five year development plan. One
can see that a huge network of Neo-liberalism has been created to advocate
the market?s economic and political decision making. The public sector
should play a very limited role. The market and the State should reduce
its role in the economic and political decision making. Public Choice
Theory should be considered as a principle of economic governance. Trade
unions should be restricted to avoid fights. Trade borders should be open
and tariffs should be minimized.
The International
Financial Institutions, IMF, WB and WTO advocated the neo-liberal economic
policies through out the developing world. An efficient ideological cadre
was developed to occupy people in order to win their hearts and hands
later. Hundreds of dollars
are being spent to establish the free markets, and to prove that these
markets are the only normal condition of capital growth. But the history
of the last two decades of this ideology is not without the failures,
whether it was a financial crisis of the East Asian or the failure of SA
in Latin American Countries and South Asian Countries. However, the fact
remains that people are being forced to live in this ideology.
Keeping in view the
neo-liberalism as a geopolitical and geo-economic agenda and its
supranational and national parameters, it is being realized that the
market structure of the developing world is extremely uncompetitive.
Moreover, neo-liberalism depends upon One size fit for all strategy for
all countries and believes that it will bring the same outcome, rather
than realizing that market oriented reforms has to be dealt with the
institutional variations around the globe. The reforms could only be
successful if the initiatives are imposed within the institutional
landscape of the given country and its environment.
From this perspective,
an ample understanding of contemporary neo-liberalism does not process,
especially keeping in view politico-ideological foundations and their
multifarious forms and diverse socio-political contradictions. Despite the
global imposition of the neo-liberalism, there are many questions to be
looked into the issue such as: is neo-liberalism an artificially
constructed theory or can it be changed? If we take a competition policy
as a central point of this doctrine then the question is, whether is it a
virtue? Does it not matter if there is no ownership for the weak,
extremely poor, illiterate as there fault is that they belong to such
regions which can?t compete. Does it matter who has the right to survive
in the given economic paradigm. On one side, neo-liberalism is a
catastrophe provided with a warning of East Asian Crises, hunger, poverty
and miseries of poor. Whereas neo-liberal ideology draws its social power
through political and economic structure, MNCs, corporate sector,
financial companies, comprador bourgeois and politicians who have been
converted to the reassuring layoffs of laissez-fair. Neo-liberalism tends
to create an environment where the economy separates from social realities
and builds a logical basis that presents itself a chain of constraints
regulating economic agents.
The developed world
particularly should not comfort itself with the hope that the hunger,
bloodshed, and economic collapse on the periphery will not touch the
centre. In this respect, the past two decades have had a harsh lesson to
teach us. The "end of history" is possible in this way if we are
not able to find any alternatives to this doctrine.
We have to look into all
issues discussed above and questions within the structure of international
political economy. Joseph Stiglitz, an eminent Economist, in his recent
article published in a Daily Telegraph that ?deregulation has not worked?.
Unfettered markets may produce big bonuses for CEO?s but they do not lead,
as if by an invisible hand, to societal well-being. Until we achieve a
better balance between markets and governments, the world will continue to
pay a high price.
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