The way to Good Society

The trickle-down theory in practice has failed miserably to deliver worldwide. In Pakistan, its failure has been spectacular but without causing any sleepless nights to the ruling elite. They do not know that they don’t know this. Using the rule of thumb some economists have estimated that to lift even 20 per cent of the population living in crushing squalor out of poverty, Pakistan’s economy would need to grow at the rate of over 10 per cent a year for at least 10 years at a stretch. Considering our mounting debt and declining incomes, this appears well neigh impossible. So far in Pakistan, the trickle-down theory in practice has only widened the gap between the rich and the poor. And more of the same is not going to reverse the trend.

In fact, continued faith in unregulated market economy, nicknamed the Washington Consensus, is more likely to end up threatening the very foundations of the state because why would any citizen of Pakistan, other than the few rich islands floating in a sea of poverty, would feel a sense of belonging to the state if the state continues to fail in its basic responsibility of providing universal access to education, health and credit and continues to refuse affordable transport, communications and housing to its entire population.

An alternate model called the Economy of Tomorrow (EoT) is being discussed at various forums worldwide. Conceptualised by a number of German economists, the new model is being promoted as a gateway to what is called the Good Society.

The following are some pertinent excerpts from Marc Saxer’s (Resident Director at the Friedrich-Ebert-Stiftung, Thailand) proposals for The Economy of Tomorrow (EoT Project — a short summary).

“Without the resistance of the masses, entrenched status-quo elites have begun to restore the exclusive economic, social and political order. Without a vision for a Good Society, the fiscal, economic, political, democratic and societal crises cannot be tackled. Without a new economic model crisis management lacks orientation.

“There is no question for Asian emerging countries that in order to tackle social and political challenges, their economies need to grow. However, there is a consensus that the obsession with GDP growth leads to distortions and needs to be replaced with a qualitative growth paradigm. Growth is not an end in itself but a means to produce the conditions for a Good Society with full capabilities for all.

“The experience of the past three decades shows that unfettered markets do not offer any solutions to ecological, economic and social challenges, but are part of the problem. The EoT rejects such blind faith in ‘the magic of the market’ and insists the grand direction of development must be determined by democratic deliberation. In order to achieve this, the relationship between the market and the democratic state needs to be rebalanced. In order to break the vicious cycle of debt and devaluation, the state needs to set a path towards restructuring the economy, inclusive distribution and stable investment allocation. However the states, ideologically discredited and financially crippled, have largely abandoned their policy guidance function. In order to set a sustainable growth path, the state needs to regain confidence and policy space. The choice is no longer between a ‘big’ or ‘small’ state, but how to build a ‘smart state’ capable of preventing risk, correcting distortions and giving policy guidance.

“In the neoliberal model, economic dynamism grows out of the incentives set by inequality and competition (‘Greed is good’). In contrast, dynamic growth in the EoT model is driven by inclusiveness. All citizens must have access to education, health care and credit and must be able to start an enterprise. If citizens are challenged by nature or face discrimination due to their race, gender or religion, both the state and the private sector have an active role to play in removing these obstacles. By providing full capabilities for all, a society unleashes the full potential of all its citizens. The provision of public goods by the state not only strengthens consumption demand, but also increases labour productivity by improving the qualification and health of the workforce. Tapping into the innovative genius, creativity, entrepreneurial energy and talent of all people unleashes the full inclusive growth potential of a society.”

Published in The Express Tribune, May 28^th, 2014.

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