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Contents
Source– The post is based on the article “Solutions by the people, solutions for the people” published in The Hindu on 12th October 2022.
Syllabus: GS3- Economy and Environment. GS2- Global Politics
News- The article explains the different economic models across the world and suggests a model for the future. It also explains the challenges faced by the presently dominant economic model.
What are different economic models across the world?
There have been two predominant economic models followed since the 20th century- Welfarist model and free market economy model.
The welfarists were in favor of government intervention in the economy. On the other hand, supporters of a free-market economy want a free hand for markets and minimum government intervention in the economy.
The alternate model was suggested by Club of Rome in 1972. It advocated for including environmental cost while estimating profits and growth.
The neoliberal economic model has prevailed in recent times.
What are the challenges faced by the current model of economic governance?
The 2008 financial crisis shows the limitation of this model. To check the slowdown, countries bailed out large financial institutions. There was no compensation for common citizens. Austerity measures were imposed on some countries like Greece.
The low inflation and balanced budget provisions has led to waves of protest. Citizens complain that the system favors wealthiest people. There is a demand to include the needs of people in economic policy.
Social tensions are too high within many countries. Their governments are unable to find fair solutions through conventional democratic processes.
Disillusionment with democratic institutions is increasing even in U.S. and Europe. Authoritarian governments are coming to power in many countries with support of citizens.
What is the new economic model suggested by Earth for All: A Survival Guide for Humanity?
It is based on the “3P” slogan- People, Planet and Profit.
It proposes collaboration between economists, ecologists and social scientists.
It proposes five systematic solutions: ending poverty; addressing gross inequality; empowering women; making food systems healthy for people and ecosystems; and transitioning to clean energy.
It compares the outcomes between present patterns and proposed alternative approaches.
The present path is called “Too Little Too Late” and the other is called “Big Leap”.
The present path will lead to environmental and social collapse. It will preserve the present inequitable distribution of wealth and power.
Big Leap”, on the other hand, can prevent catastrophe. It will lead to a more equitable distribution of economic wealth and social power. It will avoid disruptive political revolutions. It allows us to estimate whether policies related to income redistribution might cause social tensions.
What is the way forward?
Policymaking must become more inclusive and less dominated by the powerful and the wealthy.
Solutions should not be imposed by experts from the top. There is a need for deliberations among diverse disciplines and dialogue among experts and citizens.
