People are voting with their feet against free-market fundamentalism
Across the globe in over 80 countries people are protesting against free market fundamentalism. Pakistan is no exception. While many starry-eyed left friends are hoping that this may be the beginning of a major anti-capitalist movement and offering a socialist option, the fact is that the present movement in the West is basically against the free- market fundamentalism. The on-going movement is transmitting this message strongly.
The movement is the result of the failure of free-market fundamentalism which has received a big set back from the on-going economic crises. What is evident from the present crises is that fundamentalism does not work. May it be political, religious or of an economic doctrine. The Chinese premier was right to observe that “the teachers have some problem” – a typical guarded statement of the Chinese leaders. But the French who are considered to be visionary in Europe were not that guarded: President Nicolas Sarkozy says “Self-regulation is finished.” He also maintained: “Laissez-fair is finished.”
On-going economic crisis in the developed countries has resulted in the dismal growth rate which has created unemployment and cut in spending on the social sector. According to the IMF forecast quoted by The Economist “the predicted output for the advanced 34 economies that account for 52% of the world’s GDP was reduced by 0.6 percentage points to 1.6% for 2011 and by 0.7 points to 1.9% in 2012. Meanwhile, the fund expects the 150 emerging and developing economies to grow by 6.4% in 2011 and by 6.1% by 2012…”
Unbridled free-market system has tried to save the rich more than the less privileged. There is a growing realisation among the G-20 that closer-monitoring and more regulations of the financial system were required. These 20 countries represented 85% of the world’s US$60 trillion economy. A closer look at the GDP of this bloc shows that the four Bric countries collectively (Brazil, Russia, India and China) have emerged as equally big economies as the 20 countries European bloc. Though this bloc is also showing signs of catching American influenza, the reports so far are that they are expected to have higher GDP growth rate as against the recession in the G-8 countries. What saved them from the severity of the flu is that they have not listened to the ‘teachers’ and did not opt for unbridled markets. In Pakistan and India central banks have comparatively kept a tight leash on the financial institutions.
Whatever is the mechanism, it is evident that the reckless financial world needs to be tamed. They had built a market of over $600 trillion speculative derivatives – ten times the total size of the world economy. The obsession with the laissez-faire led the regulators to believe that the market has the capacity to correct itself. A presumption that proved wrong.
While people can be warned if they are living on the fault line, earthquakes cannot be predicted, however one knows that quite an accurate forecast can be made about storms. The present financial storm was gathering from late 2006 and whole of 2007, but the financial world meteorological satellite failed to catch it on the radar.
Saner economists were dismissed by the advocates of unbridled free market as either socialists or anti-globalisation. Larry Elliot and Dan Atkinson titled their book: “The Gods that failed – How blind faith in Markets has cost us our future.” They have named the “free-booting super-rich free-market operatives” as the ‘New Olympian Gods.’ And charge sheeted them as: “They promised economic stability, and have delivered chaos and volatility. They promised an economic order based on enterprise, thrift and personal efforts and have delivered one based on chronic indebtedness and wild speculation.”
“The promised a ‘transparent’ future in which all the costs and prices would be clearly laid out, allowing people to make informed choices in their lives. They have delivered a world of bizarre, occult financial knowledge, one in which everything from the true cost of mobile phone package to the real value of billions of pounds’ worth of ‘securitized’ debt is impossible to gauge.”
“They promised expanded middle class of property and share-owning individuals, a new Yeomanry of sturdy, independent citizens. They have delivered the unleashing havoc on professional and white-collar career structures, smashed up the pension schemes of the middle class and forced their children deep into debt for the privilege of attending university.”
Leading investment banks, multinational corporate giants and failing governments are being rescued by the American and European governments using tax payers’ money. What happened to all the talk about ‘survival of the fittest?’ What happened to the talk that the state should only restrict itself in regulating the interest of the public and let the market decide the faith of bankruptcies? What happened to the promises made after the 1929 US crisis, 1997 Asian crisis and Enron and Worldcom Crisis that next time the system will work?
When much smaller bail out packages were claimed by the industries in the developing countries like Pakistan, we were told by these ‘teachers’ through Bretton Wood sisters that we should let the market forces decide. Any benefit given to the textile industry, which is the backbone of the economy was called subsidies and we were punished for that. While billions of dollars subsidies given by the rich countries to the agriculture sector are Kosher, the developing countries are told that it is ‘haraam.’
The regulators in the developed economies have failed in their jobs to protect the interest of the common man. And so have auditors in looking after the interests of share-holders. The trouble is that both the regulators and the regulated around the world are Taliban of the same madrassa that teaches ‘un-bridled free-market fiqah.’ So they went along with the blind faith that the market is sensitive enough to forecast a building storm. What we have seen is that it is not the market which raised the alarm; the alarm-bells were pulled by the non-profit organisations, independent economists and journalists. What is happening now on the streets is reflecting the frustrations of the people at the lower rung of the economy. But their calls are being dismissed.
Now almost all the G-20 countries are injecting billions of dollars and cutting down on interest rates to boost their economies. The problem is that they have the money available. They are trying to raise much of the money from the sovereign funds of China, Singapore and oil-rich Gulf Countries. The real problem is that the developing countries like Pakistan, which are suffering from political instability and the twin menace of fiscal and monetary deficit, are being crowded out of the world cash-rich economies.
In the post second war period the world has progressed more than ever before. But at the same time inequality between countries and within developing countries has risen to an alarming level. Heightening inequality is tearing the social fabric of countries like Pakistan apart, it is happening everywhere. Beneath the calm surface and rising growth rate of China, India and some African countries, I had a chance of visiting the inequality pot is boiling. Where the government control is loose and there is no social net for the people like China, you see inter-provinces tussles getting ugly, unemployment pushing up the crime rate and terrorism catching the imagination of the have-nots.
The world poor who have been hit hard by the present financial crises are suffering and are hence voting with their feet against free-market fundamentalism. The G-20 governments are trying to find a solution for reigning in the financial organisations and bailing out the businesses. But is there anybody thinking about the worst: anger-spitting inequality dragon? Indeed, it cannot be wished away by the faith-healers of ‘trickle down theory.’ It’s time for sustainable flow of resources to the dispossessed. (email@example.com)