Global crises show the failure of market liberalism

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Scott Morrison's $10 billion stimulus announcement has received criticism for only supporting businesses (Screenshot via YouTube)

As the world is gripped by disasters, both natural and pandemic, it's time to rethink our global economic strategies to best serve mankind, writes Professor John Quiggin.

FOR BELIEVERS IN KARMA, Australia’s experience since last year's must look like a clear example. Having re-elected a government which has done nothing positive about climate change, rejected proposals to prepare for bushfires, slashed foreign aid and abandoned promised support for health funding, we have experienced a sequence of disasters all of which have been exacerbated by our choices and those of Right-wing governments around the world.

As early as June 2019, a month after the Election and far earlier than usual, the bushfire season began in Northern Australia. Drought and high temperatures, driven by climate change, drove the bushfire disaster. Month after month, the disaster mounted, burning millions of hectares of land and choking our major cities with toxic smoke. Australia was not alone, with similar fire disasters in California, the Amazon Basin and even the Arctic.

Heavy rain in mid-February finally brought our bushfire catastrophe to an end, at least for this season. But even before the fires were extinguished, a new disaster was underway. The coronavirus pandemic has already created global chaos and looks certain to cause a recession comparable to that arising from the Global Financial Crisis.

Most obviously, these global crises demonstrate the failure of the libertarian (or propertarian) ideas that formed the intellectual vanguard of free-market liberalism. Libertarianism has no answer to global problems that cannot be solved within existing structures of property rights. As a result, the movement has collapsed, with the serious thinkers moving to the Left and the base (well-off white men who resent being told what to do) embracing Trumpism. 

The failure of market liberalism goes way beyond this. Throughout the developed world, the political Right has spent a decade denouncing the modest measures of fiscal stimulus adopted in response to the GFC by governments including the Obama Administration in the U.S. and the Rudd Government in Australia. As the crisis developed, both U.S. President Donald Trump and Australian PM Scott Morrison held the line against stimulus. But a few bad days on the stock market have seen humiliating capitulations to reality.

Trump is calling for a cut in payroll tax for which he will almost certainly rely primarily on Democratic votes. The Morrison Government’s proposals have morphed from a modest and tightly targeted package costing no more than $5 billion, to a downpayment of $10 billion or more, with the promise of “scalability” and cash handouts on the model adopted by Rudd.

The coronavirus crisis has also demolished the reactionary appeal of nationalism. Both Trump and Morrison rushed to close the borders to visitors from China. That made sense for the brief period when the virus was contained within China. But once that period ended, national boundaries became irrelevant. Governments that have taken the virus seriously, such as those of Italy and China, have limited travel of all kinds, not merely travel across national boundaries. By contrast, nationalist governments have blocked travel from “unfriendly” countries but have otherwise done little.

When the smoke clears from these disasters, there will be little left of the market liberal, neoliberal and nationalist ideas that have dominated politics, particularly on the political Right, ever since the 1970s. But what should replace them?

One crucial idea is that of global public goods, pushed by the United Nations Research Institute For Social Development in the early 2000s. Global public goods are products of collective action that yield benefits throughout the world or at least beyond national boundaries. Kaul, Grunberg and Stern define them as components of our common cultural and environmental heritage, such as measures to control climate change, global health, knowledge and information and world peace.

Interest in the notion of global public goods was closely related to the notion that international transfers associated with financing for the provision of such goods could replace or supplement official development aid, which has been cut repeatedly despite continued promises by rich countries. One particularly prominent idea was the introduction of a levy on global financial transactions, often referred to as a “Tobin tax”.

As our failures come back to haunt us, it is time to revisit these ideas. The damage done by global warming and pandemic disease is already immense and there is undoubtedly worse to come. But if the ideas that produced these catastrophes are finally replaced by a global commitment to a better world, we may yet end up better for going through this.

Professor John Quiggin is an Independent Australia columnist and an economist and Laureate Fellow at the University of Queensland. You can follow him on Twitter @johnquiggin.

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