The ‘Economy of Tomorrow’

Published: October 18, 2013
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The writer is the Resident Director of Friedrich-Ebert-Stiftung, a German Political Foundation committed to the values of social democracy

The writer is the Resident Director of Friedrich-Ebert-Stiftung, a German Political Foundation committed to the values of social democracy

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.

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Reader Comments (5)

  • Parvez
    Oct 19, 2013 - 12:05AM

    That was interesting and well argued but I feel the message is not one that economists and political leaders are not aware of. Possibly the stumbling block is the enormity of the challenge and as is seen, it is always easier to postpone than to fix the problem especially because vested interests are so deeply rooted in the system.

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  • Anonymous
    Oct 19, 2013 - 1:46PM

    So, what will shape the economy of future? Old answers like raising taxes, eliminating subsidies, poor performance by public employee, expensive mobility as well as communication are Not the new drivers for the economy of future. Instead of Mega perhaps small is better, we need to look toward China and the Far East for answers. Institunionalized new entreprenuers instead of creating blocks by raising many taxes on small growth. Bureaucratic compliances of reporting must be eased for businesses. Concentration on growth must be priortized.Recommend

  • ssad
    Oct 19, 2013 - 9:41PM

    Again an incorrect assertion and a lack of knowledge of the crisis in 2008. The problem was not deregulated capitalism as the author has argued, but crony capitalism. The government sponsored schemes, and penalties on banks led to lax lending standards which caused the crisis. I have been reading a lot of economic articles lately, and it saddens me to realize that none of the newspapers in Pakistan have a solid understanding of the “dismal science”. This author has asked for greater control because he believes the neo classical models are what have been followed which results in a freer market- not entirely true. Neo-Keynsianism is the major economics discipline in these countries, which urges the state to become massive and unsustainable. Also incorrect is his point that the crisis was not predicted. The most suitable branch of Economics, called the Austrian School, had predicted the crisis years in advance (2002). In fact, according to the Austrian School’s analysis the crisis is still not over. There is yet another unsustainable boom, and this will result in another bust. There are worrisome signs that it might occur this year or the next.
    The government policy coupled with a cosy relationship with such intellectual elite/ social activists create a popular economic model, but one which is not sustainable, hence causing a crisis.
    I would be happy to elaborate the mechanisms behind it if anyone wants to know.

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  • Adam Malik
    Oct 29, 2013 - 8:58PM

    Well argued article that is written in current international scenario. The Deregulation has become tool for financial hegemonic powers to not only extract the resources for also to encroach the state’s space. Even states are subserivient to financial interests thats why its more important and needed the new concepts for economy of people – the economy of tomorrow.

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  • Nov 8, 2013 - 12:22AM

    This is to create consciousness on the subject. The title of the article itslef is very much inspiring and appealing. The question of economy of tommorrow is very much important for poor and vulnerable classes of society and this question must be linked with democraccy.

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