August 25, 2020
Economics is distracting to decentralize, whereas politics tends to centralize.
Every crisis brings fore the tension in the social contract in the society of which economics and politics are the key pillars.
This is more so when a crisis morphs into a full-blown economic, as in the case with the ongoing pandemic.
Neoliberalism initially coined in 1938 by German scholar Alexender Rustow.
FA Hayek is known as the father of neoliberalism who wrote a famous book “Road to Serfdom” in 1944.
Liberalism, whereas promoted equality, neo-liberalism defended inequality, where poor becomes weak because of its laziness and rich, becomes rich by its hard work.
Liberalism focused more on freedom of speech, and neo-liberalism craved more for the market economy, i.e. free market and it stands against welfare states.
The economic impact of the pandemic captured in the euphemism of the fight between lives and livelihood.
World over we have seen the expansion in the role of states and relief measures that triggered the battle of recession.
The role that government must play will now depend on which economic ideology has the winning deck.
When the world collided the great depression, Keynesian economics trumped classical economics.
Later unemployment in the 1970s and the election of Reagan saw the rise of neoliberalism where government interrupted in the economy of rising oil prices.
To be very frank, neoliberalism has the contours of privatization, deregulation, free trade and harsh discipline in government spending with the private sector by playing a more significant role in the economy.
Neoliberalism was newly introduced under significant threat with the global crisis of 2008.
In India’s chequered pre-arranged meeting with socialism, states have been producer and provider of specific goods and services with the redistribution of wealth and opportunity as a primary objective.
Yet poverty reduction took off only when Indian states paved the way for neoliberal policies through economic reforms.
In countries with universal healthcare, the neoliberalism policies dominate.
The role of state hinges on what and how we define public and private goods.
Public goods are non-refusable and non-competitive means someone can’t be excluded based on their ability to pay, and the person using public good can’t prevent others from using it. In contrast, private products are just opposite to them.
It is best exemplified in India as well where the private sector has massively scaled-up manufacturing in sanitizers, PPE kits, ventilators, testing kits while public and private hospitals in providing treatment.
MNERGA and national infrastructure pipeline would go a long way in bringing together public and private sector.
Similarly, agriculture could also trigger private sector to deliver on high growth.
The pandemic combines the economic basis of the state, and this impression would continue to influence policymaking for this generation atleast.