The Need for a New Financial Architecture for the Global Economy and Some Suggestions

How the Coronavirus Outbreak Has Spurred a Need for Moving Beyond Neoliberalism

The Coronavirus Outbreak has laid bare the weaknesses of the present financial architecture in the global economy.

As the tightly and hyper connected global economy has ground to a halt to prevent the contagion of the Covid 19, it has also brought to the fore the need for a new financial architecture that is just, equitable, and fair to the workers, is environmentally and socially responsible, and above all, not prone to the periodic crashes or the booms and busts that are often mentioned as inevitable to neoliberal market economies.

Indeed, if not anything, it is time to get rid of the Neoliberal Dogma and embrace a more egalitarian architecture in the global economy.

This sentiment has been gaining ground in recent weeks with many commentators pointing to the crisis caused by Covid 19 as being the result of not able to distinguish between a Market Economy and a Market Society.

In other words, while it is perfectly ok to have a Market Economy, extrapolating it to society leads to corrosion of the social fabric and the breakdown of trust.

No wonder even the British Prime Minister, Boris Johnson, mentioned that “there is such a thing as society” marking a radical departure from the Thatcherism of the erstwhile Prime Minister who, famously remarked in the 1980s that there is nothing such as a society.

How to Change the World without Radical Disruption and Gradually and Slowly

Having said that, while it is easy to say that the present crises are due to Neoliberalism, it is also the case that one cannot impose radical change in a short time without causing huge disruption to the workings of the global economy.

Indeed, if not anything, the lessons from the Demonetisation exercise in India mean that changing the Status Quo overnight leads to chaos and confusion.

Thus, there is a need to approach the problem of the present global economy in a gradual and phased manner.

Of course, there are no easy solutions as well and hence, it is our suggestion that the world leaders treat the present crisis caused by Coronavirus as the symptoms of Neoliberal sickness and then, once the global economy recovers, go about curing the illness in a permanent manner.

In other words, what we suggest is that get the global economy back on track and use the present crisis as an opportunity to set right the imbalances and the inequities of the present system.

On the other hand, there are some flipsides of this approach as well and they include ignoring the problems for the moment or delaying the inevitable.

We Cannot Have Socialism for the Rich and Capitalism for the Poor

Therefore, another suggestion is that as an alternative, ensure that the beneficiaries of the various stimulus packages are the poor and the marginalised and not bankers and big businesses and corporations.

While we do not advocate socialism, we also insist that it cannot be Socialism for the Rich and Capitalism for the Poor.

For instance, in the United States, the Multi Trillion Dollar Stimulus is highly skewed towards the businesses and away from the workers. While there are some bread crumbs for the latter, the meaty portions are for the former.

Thus, while it is important to address the problems first, it is also necessary to start with change now.

Moreover, while Governments worldwide are Printing Money to plug the gap in the deficits, they must ensure that it benefits all and not a few.

To take an example, the Indian response to the crisis by locking down the country has resulted in the horrifying visuals of Hundreds of Thousands of Migrant Workers being displaced and made to walk to their villages on foot.

Such incidents cannot and should not be ignored if we are to address the underlying problems in our present global economy.

Reducing Financialization and Saving the World and Saving Ourselves from the Abyss

A good place to start to fix the global economy would be to reduce the Financialization of the market economies.

To explain, ever since the 1970s, the global economy has seen the emergence of finance as the driver of the economies and not the manufacturing sector or the other sectors.

While equity markets boomed, the shop floor workers found themselves without jobs.

Moreover, easy money and cheap liquidity have powered the financial sector to stratospheric highs and as governments printed more money, it found its way into not making things, but into speculation and betting on stocks.

In addition, outsourcing resulted in a transfer of wealth to Asia, though the beneficiaries again were capitalists and not the workers.

As the global economy now stands at the Abyss of Failure and Staring at a Collapse, perhaps it is time for the Who’s Who of the Global Elite to start thinking about how to Save the World and more importantly, Save Themselves in the process as well.

The time for change is now.

History Repeats When Forgotten

Last, while our suggestions might be dismissed as being impractical or utopian, we also point that unless the underlying problems are fixed, we would be repeating the same mistakes again and again.

After all, Those Who Forget History are Condemned to repeat it and hence, it makes sense to use the present crisis to learn the right lessons and also to draw inspiration from the earlier eras of capitalism.

To conclude, unless policymakers worldwide change the course of the global economy, we are likely to end up in the same place and go around in circles till it collapses suddenly.

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