IMF research department came out with an article “Neoliberalism: oversold” in Finance and Development a quarterly magazine published quarterly by IMF. The article says while the neoliberal agenda has rescued millions from poverty, the policies have not delivered as expected. It further says that these policies have resulted in increasing inequality and jeopardising sustained growth.
The report comes out with three main conclusions.
- The benefits of the increased growth is difficult to establish
- The cost has been high; increased inequality and reduced equity
- There need to be a distribution agenda to growth
These observations which come from IMF is however too late as they have destroyed public enterprises around the world many of which have been dismantled for private expansion at the cost of public services. Time and again there have been protests against the austerity measures imposed on the country in the name of fiscal consolidation.
The neo liberal agenda according to the article has two main plants. One is the deregulation and opening up of domestic markets, including financial markets for foreign competition and the second is privatisation and reducing government ability to run fiscal deficits and accumulate debt.
These measures have resulted in massive protests on the ground by people who get impacted due to loss of jobs and social security measures as part of the austerity measures. Both the set of measures have their implications as we know of fly by investors in the financial market who creates financial bubbles delinked from trade and manufacturing. The austerity measures have seen mass protests as we saw in Greece where unemployment rates increased to 26% and GDP fall by 25%.
Mr Arun Jaitley, Finance Minister of India, writing on 25 years of Indian Liberalisation, wrote in Indian Express “ Jobs have not kept up the pace with economic growth, manufacturing has not emerged as a vibrant sector as in many East Asian economic successes, and economic inequality remains a challenge. Experience has shown that institutional checks and balances were not strong enough to root out corruption in relation to major public assets such as spectrum, coal, and land.”
There is no evidence of neoliberal policies alone resulting in growth, UNTACD in its policy brief Paradox of development says’ countries with the strongest performance have rejected the dominant economic wisdom of trusting their growth prospects to financial markets, and instead have pursued innovative and heterodox policies, tailored to local conditions. This has allowed them to shift resources to activities that are increasingly productive. Meanwhile, many developing countries that have embraced finance-driven globalisation (FDG) have seen their ability to achieve this structural transformation greatly reduced. This is seen in the study done by Institute of International Integration who analysed 136 countries from 1990 – 2007 against average real per capita GDP growth. There was no evidence of a positive correlation between financial globalisation and economic growth in developing countries.
It is time to move on from neo-liberal economic framework which has not just resulted in growth but have also done lasting impact on the ecology of the planet. It is time for an ecological economics which looks into job creation, protect the environment and drive the countries of the world towards equity and inequality.