Economic news from around the world has been largely grim for over a decade. After the 2008 financial crisis, GDP growth rates have been slowing around the world, even as unemployment figures remain high, particularly among the younger sections of society.
Thanks to President Trump’s tax reforms, the US-led global economy has shown a slight uptick in employment and GDP growth figures in 2017-18, but the World Economic Outlook report of the IMF fears that this upswing will taper off in the next couple of years as global economies will suffer from increased protectionism, trade wars and financial volatility.
Similar summations have been made by the OECD’s Economic Outlook report released in its May this year. In fact, the organization’s long term prediction sees suppressed global GDP growth at about 2 percent for the next four decades, with even Asian economies (mainly China and India) predicted to slow down in the future, due to increased tariff barriers, climate change and automation.
‘End’ of neo-liberalism
The problem is also aggravated by a sense of confusion among economists over finding the way ahead for the global economy, even as the fatuous debate between two camps of contemporary economics — neo-liberalism and Keynesianism — rages on inconclusively.
The free market philosophy of neo-liberalism supports deregulated economies, advocating private sector enterprises as the main engines of economic growth. Neo-liberalism contends that it is the private sector and not the public sector that increases productivity, creates more jobs and promotes technological innovation.
Critical of big government and its propensity to make ‘erratic’ fiscal and monetary policy decisions, neo-liberal thinkers like Milton Friedman and Frederick Hayek claimed that bureaucratic management of the economy often skews growth and distorts the functioning of a naturally self-correcting and dynamic market place.
The philosophy of neo-liberalism was adopted by most Western governments in the early 1980s (replacing the post-World Wars Keynesian welfare state model), mainly under the leadership of US President Ronald Reagan and British premier Margaret Thatcher.
However, repeated financial crises beginning with the stock market crash of 1987, Asian market collapse of 1997, the dot-com bust of 2000 and the derivatives market meltdown caused by the sub-prime mortgage crisis of 2008 has made neo-liberalism increasingly unpopular around the world.
Every time capitalism has been written off by its detractors, a new technological revolution has come to its rescueDr. Adil Rasheed
In 2008, mega corporations and big banks began to collapse and even neoliberal hardliners started demanding state intervention for bailouts. It was now time for Keynesianism to return with a bang, as governments started regulating banks and infusing monetary and fiscal stimulus to offset deflationary forces let loose by the financial crisis.
Soon, most of the developed world — including the US, the EU, Canada and BRICS states — adopted Keynesian policies, and neo-liberalism started getting equated with crony capitalism, suppression of wages, outsourcing of jobs, downsizing and unemployment as well as acute social and economic disparity. In the aftermath of the crisis, Nobel prize-winning economist Joseph Stiglitz declared “neo-liberalism is dead”.
However, Keynesianism has also received its fair share of criticism in recent years. It is charged that greater fiscal and monetary interventions by various governments have not been able to kick-start a self-sustaining economic recovery, even as national debt levels have shot through the roof in many countries of Europe, Africa and Asia.
New, unidentifiable asset bubbles have been created by unprecedented monetary easing and ‘too big to fail’ financial institutions have been allowed to continue operating in their former inefficient and corrupt ways with impunity.
As both Keynesian and neoliberal models are left with fewer tricks up their sleeves to galvanize tardy economic growth, a crisis of economic theory stares us in the face. In fact, many socio-political, economic and technological experts like Richard Wolff, Wolfgang Streeck, Paul Mason and Calum Chace have started calling the present phase as the beginning of the end of capitalism.
However, the obituary of capitalism has been written many times in the past and even the most celebrated economic thinkers like Adam Smith, John Stuart Mill, David Ricardo, Thomas Malthus, Karl Marx, Hyman Minsky etc. have theorized on this prospect for almost the entirety of the 250-odd years of capitalism’s history.
In fact, every time capitalism has been written off by its detractors, a new technological revolution has come to its rescue. If the steam engine, the printing press and telegraph revolutionized global economy in the 19th century, the internal combustion engine and telephone rescued capitalism in the 20th century from literally running out of steam.
It is said that Information and Communications Technology could salvage capitalism in the 21st century, but some experts posit this time capitalism might have created its ultimate nemesis in the Internet.
The contention is that revolutionary changes in Information and Communications Technology and in renewable energy technology could usher in a new ‘post-capitalist’ world, where social and lateral networking as opposed to cut-throat private sector competition and top-down government planning would usher in a ‘post-capitalist’ future.
According to noted economic and technology expert Jeremy Rifkin, information technology has already ushered in “collaborative commerce” by bringing down marginal costs of many products to near zero — particularly of newspaper, magazines, books etc. This trend is not limited to information-related products, but Rifkin avers may soon pervade markets of physical goods.
With the coming of the “Internet of Things”, small production units would be able to access the data for producing sophisticated goods that is currently the preserve of big corporations.
The coming of 3-D printing, say some experts, could also bring down the marginal costs of physical products. This problem was discussed by Paul Romer in his famous paper ‘Endogenous Technology Change’ way back in 1990.
Paul Mason, author of the book ‘PostCapitalism: A Guide to our Future’ believes that online donor-run non-market ventures like Wikipedia, cooperative markets, time banks, informal file sharing among scientists and experts etc. could lead to a ‘post-capitalist’ non-monetary society.
Populations may move out of cities as connectivity could make them rich and productive even outside congested cities, the traditional centers of economic growth. Perhaps, the ability of humans to connect and collaborate may also help offset the cerebral technological singularity that AI threatens us with.
These speculations about a post-capitalist economy though fascinating, seem as surreal as Chomsky’s stateless anarcho-syndicalism. Perhaps, if mankind survives geopolitical conflicts in the future rising from various political and economic uncertainties, then cooperation and sharing as opposed to greed and competition may lead us to a more evolved post-capitalist future. One can certainly speculate and be optimistic in an uncertain time!
Dr. Adil Rasheed is Research Fellow at the Institute for Defence and Strategic Analyses (IDSA) based in New Delhi since August 2016. For over 20 years, he has been a journalist, researcher, political commentator for various international think tanks and media organizations, both in the United Arab Emirates and India. He was Senior Research Fellow at the United Services Institution of India (USI) for two years from 2014 to 2016, where he still holds the honorary title of Distinguished Fellow. He has also worked at the Abu Dhabi-based think tank The Emirates Center for Strategic Studies and Research (ECSSR) for eight years (2006-14).