COVID-19 and the Death of Market Fundamentalism

In addition to countless human tragedies, the COVID-19 pandemic will have many lasting social and economic impacts. However, perhaps none will be more profound than the death of free market fundamentalism and the return of the state.

Why now? After all, there have long been moral, social and environmental risks posed by an unfettered market. Risks that strongly justify state action – inequality and climate change being the two most glaring examples. It didn’t help.

This is different. COVID-19 exhibits blinding power economic case of change. It shows that an ideological and quasi-religious approach to market regulation, sometimes called neoliberalism and, until the virus, the dominant political approach in the West, is fatally flawed. It creates a weak and unstable economy, which amplifies risks and is unable to manage shocks1. He threatens himself.

Of course, a pandemic would still have had a very significant and disruptive economic impact. However, we can already see that countries with a cohesive, competent, respected and well-resourced state – all of which market fundamentalists have sought to undermine – are likely to have both and human cost.

Thus, market fundamentalism is no longer even in the interests of the corporate sector or financial elites. It creates unmanageable economic risks and ultimately poses an existential risk to capitalism, as argued by Nobel Prize-winning economist Joseph Stiglitz2. Therefore, any business or finance leader who continues their knee-jerk support for actions to “free markets, cut taxes”, “get government out of the way”, will now know the consequences.

It’s not about being for or against “the market” or “the business sector”. It is not about “curbing corporate power” or developing “an alternative economic system”. Capitalism, properly defined and well managed, can be a powerful and effective making up of an intelligently designed, democratic and fair society.

However, what has clearly failed is seeing markets as some kind of pure ideology. This type of extremist fundamentalism resembles Islamic fundamentalism which promotes terrorism, or Christian fundamentalism which opposes science. Fundamentalism leads to thoughtless corruption without evidence of the original idea.

Markets at the heart can to work. When properly regulated, they are an effective and efficient means of organizing certain activities. They are useful part of a system – but are not a system in themselves. Left to their own devices, they do not solve all problems or meet all social needs. This is why the return of the state is essential to build a stable economy. As a bastion of capitalism, the FinancialTimesstated in a recent editorial:

“Radical reforms – reversing the dominant political orientation of the past four decades – will have to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities. , and seek ways to make labor markets less precarious Redistribution will again be on the agenda, the privileges of the elderly and wealthy in question Policies until recently considered eccentric, such as taxes basis on income and wealth, will have to be taken into account.

I am not naive about the response that will come. Proponents of market fundamentalism will be desperate to claw back public spending and fight the inevitable pressure for higher taxes and stronger services. This response must be fought. But to succeed, such opposition will need to include – perhaps even be led by – many of those same powerful elites who previously advocated, or at least condoned, the market as an ideology.

Why would they?

First, they will have the consequences of not managing economic risks etched in their memory by COVID-19. But many will also recognize that this is only the first of many ongoing risks that are, like the virus, completely predictable based on solid scientific evidence.3.

Rather than an unexpected “black swan” event, the virus is only the first in a herd of black elephants on the run are rushing towards us: climate change, ecosystem degradation, deforestation, water shortages, food crises triggering geopolitical conflicts, ocean acidification, inequalities and many more. These will impact the global economy as an ongoing series of COVID-19 viruses, with no possible vaccines, that will last for decades. The Great Disturbance is now clearly underway.

This is the future in which our economy will have to be managed. The return of the state and a well-regulated market economy will be our only chance to achieve this.

COVID-19 gives us clear evidence that market fundamentalism is a failed economic strategy. Interpreting markets as an ideology or quasi-religious belief system leads to unmanageable and systemic economic risks. Any corporate or financial system leader who does not now become an advocate for a strong, well-resourced and respected state, decent taxes and a strong social safety net, will share the responsibility for the decline of capitalism. .

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