“Liberal economics creates illiberal societies”

News: Capitalism and the idea of liberal economics has been proved to be counterproductive for the equality and democratic values. 

It has given rise to nationalism and authoritarianism globally.  

How liberal economics leads to authoritarian regimes? 

Liberal economists are against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens. 

The liberal policies in the last 30 years reduced the taxes on incomes and wealth for the people at the top. This was justified on the basis of the idea that this will lead to growth and there will be enough to share through the trickle down effect. 

Although the pie has grown larger but the richest few have been taking the major advantages of that as shown by the various reports on inequality in the world. 

With every global crisis like the financial crisis of 2007-08 and the ongoing COVID-19 crisis — the rich are getting richer while the poor are getting poorer. 

How is the ideology of liberal economics has harmed the world?  

Political Implications- This has led to weakening of democracy and secularism. 

Rise of Authoritarian governments – History shows that whenever hopelessness spreads in societies, they are fertile grounds for messianic saviours to form an authoritarian government  

The rise of populist leaders around the world has shown that people still get swayed by the idea of messianic saviors. Authoritarian governments are now being democratically elected.  

Economic implications-Capitalism has led to Inequities within economies and an unsustainability of economic growth. Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.    

Liberal economics supports Privatization but this makes governments struggle for resources to provide public goods. It gives another opportunity in the hands of top most to buy what they need, while this prevents those at the bottom to even have basic health and education facilities. This increases the gap between the haves and the have-nots. 

Why neither communism nor capitalism is the solution? 

Although Communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s idea that there should be no private property was a failure. This deprived people of personal liberties.  

Capitalism’s idea of replacing all publicly owned enterprises with privately owned ones (and reducing taxes on wealth and high incomes) has not worked either. 

It has denied many of their basic human needs of health, education and social security, and equal opportunities for their children. The private property solution has also harmed the natural environment as businesses work on the profit motive and not on ecological motive. 

Due to this the ecological commons are harmed, and social equity suffers. 

What is the way forward? 

The extreme application of both Communism and capitalism has created negative consequences. 

Climate change and political chaos around the world are both warnings that capitalism needs reform.  

A new form of “Gandhian” democratic socialism, powered by cooperative economic enterprises is the way forward. 

It will create wealth at the bottom, not only at the top, and save humanity and the planet. 

Source– This post is based on the article “Liberal economics creates illiberal societies” published in The Hindu on 14th Jan 2022.