Context: Inequalities of wealth have increased around the world and India is becoming one of the world’s most unequal countries.

• 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.  

Role of globalisation and privatisation in increasing economic distress

• Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.
• Role of Globalisation: Opening national borders to free trade became an ideology in economics in the last 30 years.
• Taxes of incomes and wealth at the top were also reduced.

The ideological justification was that the animal spirits of ‘wealth creators’ must not be dampened.

• With higher taxes until the 1970s, the U.S. and many countries in Europe had built up their public health and education infrastructure and strengthened social security systems.
• The rich are now being taxed much less than they were.
• The pie has grown larger but the richest few have been eating, and hoarding, most of it themselves.

Role of privatisation: ‘Privatisation’ of everything became another ideological imperative in economics by the turn of the century.

• Selling off public enterprises raises resources for funds-starved governments.
• Another justification is efficiency in delivery of services, setting aside ethical questions of equity.
• When ‘public’ is converted to ‘private’, rich people can buy what they need.
• The gaps between the haves and the have-nots become larger.

How liberal economic policies are creating illiberal societies

• Liberal economists, promoting free markets, free trade, and privatisation, are worried by nationalism and authoritarian governments.
• They rail against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens.
• Liberals must re-examine their ideas of economics, to understand their own culpability in creating authoritarian and identitarian politics.

The failure of capitalism and communism

• While communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s solution to the “property” question — that there should be no private property — was a failure.
• It deprived people of personal liberties.
• Capitalism’s solution to the property problem — 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.

Suggestion

• Climate change and political rumblings around the world are both warnings that capitalism needs reform.
• Economic policies must be based on new ideas.
• Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it seems to be trapped.
• Principles of human rights must not be overpowered by property rights.

Road Ahead

• 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 required in the 21st century, to create wealth at the bottom, not only at the top, and save humanity and the planet.