With the fall of the Berlin Wall and the subsequent collapse of communism in the early 1990s, neoliberalism emerged as a viable alternative ideology in theory and in practice. Francis Fukuyama’s much debated book, The End of History and the Last Man, gave further boost to this line of thinking. The book offered a clear picture of what the 21st century would look like. Fukuyama raised a very pertinent question: “Have any political and economic models arisen that could challenge liberal democracy as the best way of organizing human societies?” Fukuyama, however, remained unconvinced and could not find a suitable answer even though The Washington Post lauded Fukuyama’s book as “… a landmark profoundly realistic and important… timely and cogent.” Thereafter, the world ushered in the present century and, today, after over two decades, questions are being asked about the viability and the relevance of the neoliberal ideology in the backdrop of the contemporary global order.
Before we proceed further, let us acquire a brief idea about neoliberalism. It was Franklin D. Roosevelt who appropriated the term, ‘liberal’, in the 1930s. The liberal school of thought advocated that the government should regulate business with an aim to provide public goods like education, housing, dams and highways, medical benefits, pensions and so on. In other words, it argued that government programmes and strong labour unions would make capitalist economies more productive and equitable. Thinkers like Friedrich Hayek (The Road to Serfdom) argued that there are certain functions that can be performed by the government but not by the private sector. For example, we need laws and judiciaries to safeguard property rights and enforce contracts as well as a strong army to provide physical security to the State. In other words, the central role of the government in administration and decision-making is vindicated. In his book, Capitalism and Freedom, Milton Friedman opined that the government should play an instrumental role in stimulating growth and maintaining “aggregate demand”.
This liberal line of thinking, however, confronted a major challenge in the post-War years, not from the socialists but from the so-called neoliberals. In sharp contrast to liberal thinking, neoliberals advocated the idea of a minimalist State where the government would play a smaller role in managing economic affairs and meeting public needs. They opined the need to remove all obstacles in favour of free exchange of goods and labour, more in tune with the ideas of Adam Smith and J.S. Mill who advocated laissez-faire capitalism and the promotion of individual liberties. After getting elected as the president of the United States of America in 1992, Bill Clinton announced that “the era of big government is over.” Tony Blair’s government in the United Kingdom also adopted a similar approach to international trade, the beginning of what has been known as the phase of globalisation. But soon, the world started witnessing the negative fallouts of the neoliberal framework.
Economic deregulation — it was supposed to spur competition — resulted in the rise of monopoly in several important sectors like telecommunications, mass media, the music industry and so on. The result? The big fish kept on swallowing up the smaller ones. This resulted in the rise of severe inequality abetted by the neoliberal ‘global’ order. In Globalization and Its Discontents, Joseph Stiglitz painted a grim picture of the so-called developing world featuring a growing divide between the haves and the have-nots that left the third world countries in dire poverty. Further, Stiglitz advocated that globalisation and the market economy had failed to produce the promised results in Russia and other emerging economies that aimed to transform from socialism to the market economy. In many respects, the performance of the market economy proved to be even worse than that of the socialist economies. The Western countries forced the poor economies to eliminate trade barriers but continued with their own barriers. In the process, the developing world was deprived of savouring the desired fruits. Another of Stiglitz’s books, The Road to Freedom: Economics and the Good Society, focuses on the stark failure of the liberal order. In it, Stiglitz advocated that deregulation caused the biggest ever financial crisis in the world. Free trade accelerated the process of deindustrialisation and transnational/multinational corporations exploited consumers and workers, resulting in serious financial crises in the global market during 2007-2009. In this context, Stiglitz came out with a new theory: economic and political freedoms are inseparable. The right to vote makes no sense to a starving person. Our social problems are not the outcome of laws of nature or economics; rather, they are the result of rules and regulations governing the economy.
The hollowness of neoliberalism became visible because it is ill-equipped to address the rising global economic challenges; additionally, it gives birth to stark inequalities. Today, the neoliberal ideology faces its biggest crises from within.
Raj Kumar Kothari is Vice-Chancellor, Sanskrit College and University
