For years proponents of globalization and free market economy labeled those who desire to include social justice, wealth distribution, fairness, and equity within economic framework as either socialist or communist. Most neo-liberal economic thinkers considered themselves the foremost custodians of capitalism and as the visionary thinkers of the modern age. The modus operandus in the economy, they claimed must be market based and must be the waves of the future; if it’s not working for you then something must be wrong with you.
We know from history that markets have always existed since the beginning of time. The fundamental difference with modern economic practice is the role the market plays in the community. Today the market is the central part of the community versus the historic position of the market as an institution that serves the community. Therefore, any glitch or hiccup in the economy will have a large impact on the community which will result in the lost of assets and wealth of thousands of people.
The recent economic failures on Wall Street sent shock waves through the global economy, eight years after we first saw the consequences of deregulation and the mismanagement by corporations like Enron, WorldCom, and Tyco. These events should not be viewed as independent isolated cases, more so they are a symbol of a deep systemic illness that is caused by deregulation which is the main tenant of globalization,
Neo-liberal economists including Friedman and Hayek argued that regulations are stifling the economy and what was needed was a free market economy that allowed the market to freely exist without the government monitoring activities. Instead of having a government or independent agency regulating agency; neo-liberal argued that the market will self regulate, thus relegating justice and fairness in the market to the background. They made these claims with no accountability for greed and responsibility on the part of the business executives. The social contract was simple, how corporations handled their business was not important, what is important is the sacrifice the general public have to make to accommodate the welfare of the corporation.
The current economic framework is based on the society as a whole making every possible sacrifice to make sure that big business can maximize as much profit as possible, while ignoring labor, environment, wealth distribution, and taxes.
The recent failures in US are the end result of an economic policy that some will argue never benefited society as a whole. Modern global economies have experience growth without social responsibility to the native communities that were exploited. Companies that are given tax breaks by host countries in Africa, Asia and other places thrive with cheap labor, lower tariffs and neglected labor laws in their host nations. Profits they accumulated go directly into the hands of the shareholders and executives at the expense of the poor masses.
Now same people who are proponents of less government – against government intervention and social welfare; now welcome government intervention when they are in trouble. These company executives are asking for bailouts and handouts. Will this act of corporate bail out make the CEO who just escaped with all his loot more compassionate about the need for healthcare and making ends meet among the middle class and poor? For what is good for the corporation is also good for the individual citizen. What is clear is that the interest of the rich is protected while poor class and middle class are neglected due to their inability to exert control over the politicians. Globalization and capitalism in our modern day must put account of the less powerful and make sure that the collective interest of the citizens of the global villages supersedes the welfare of big powerful corporations.
Mr. Nyan writes for Afripol on financial and economic matters.