The global financial and economic crises of recent years — with their multiple implications in the industrialised world, but now also increasingly visible in emerging and developing economies — are of a political nature. The banking crisis in the US, which extended into Europe and triggered the Euro crisis, is a product of financial deregulation, but also of accumulation of public and private debts over the last three decades. The social consequences of the crises in countries such as Greece, Portugal and Spain have been severed by Germany-driven austerity policies. In order to overcome the economic crises and dangerous national fragmentations within Europe, more coordinated and consolidated financial, economic and fiscal policies would be needed.
Again, the problem derives from the lacking capability and will of the political sphere, mostly in the hand of the nation states, to deal with a deregulated capitalism.
At the same time, politics have been driven by a permanent obsession to follow the assumed needs of the markets. In southern Europe, democratically elected national governments are being undermined by international technocrats dictating economic reform packages, instead of searching for a broad-based consensus for reforms. When criticised, the most prominent discourse from technocrats and European politicians has been: ‘There is no alternative’ (TINA). These simple words are proving that politics have become subordinate to financial markets and democratic principles are only suitable if they serve capitalism. But the old paradigms are coming to an end and the new power struggles have just started. The recent government shutdown in the US could be an example of how much political decision-making over economic policies might become ideological.
Beyond the lacking political capacities and the existing public discourses lie a crisis of economic thinking and understanding. The majority of influential economic thinkers, largely following a neo-classical school of thought, have not been able to prevent or even predict the ongoing financial and economic crises. Most of the countries on the globe are now sharing similar challenges, despite very different starting points: to find ways to build up a socially inclusive, financially stable and ecologically dynamic economy. Hence, new economic concepts are urgently needed, in order to define policy instruments oriented towards the needs of a growing global population. Ultimately, the economies should create full opportunities for all, making the economic and financial markets an instrument of policy-making rather than a goal in itself.
In order to achieve forward-looking economic models, one has to understand the political economy of reforms, in every specific context. Very often, the coalitions maintaining the status quo have built up very powerful networks with direct or indirect influence on the processes of policy-making. For the purpose of change, platforms for the discussion of reform agendas have to be established; new alliances, including diverse stakeholders, have to be created. Alternative narratives and long-term visions with the ability to convince different groups of society are needed for winning public debates and building up political pressure on decision-makers. In the end, the way towards the ‘Economy of Tomorrow’, is a political struggle.
Published in The Express Tribune, October 19th, 2013.