Protective Liberalism: An Alternative to Neoliberalism, A Warming Agenda For WSF 2024

Neoliberalism came as the economic policy after the great depression of 1930 which is often associated with laissez-faire economy as conceptualized by Adam Smith back in 18th century that advocates ‘free’ market and anti-regulatory policies.

Feb. 13, 2024, 8:08 p.m.

Two decades ago, the world witnessed massive mobilizations against the destructive impacts of neo-liberal globalization, leading to a vital conversation about alternatives to this prevailing development model. The first World Social Forum (WSF) was held in Porto Alleger in Brazil in 2001 and served as a space for diverse social movements, community campaigns, trade unions, youth organizations, academia, and others to congregate and collaborate.

The last WSF (2023) was held online from 23 to 31 January 2023 due to the Covid-19 pandemic, with the theme of "Another World is Possible: People, Planet, and Peace over Profit”. It also marked the 20th anniversary and launched a new phase of mobilization and convergence for global justice. This time, Nepal is hosting WSF 2024 in the city of Kathmandu from February 15 to 19. It will have social dialogues on currently facing issues such as unprecedented environmental crisis coupled with rising inequality, widespread food insecurities, majoritarian violence, post-pandemic revival and escalating tensions between major powers. It is a space and process to develop the collective power of people's movements and civil society organizations across the globe, uniting against neoliberals, climate injustice, patriarchy, casteism, racism, queer-phobia, xenophobia and wars. Among these issues I am describing about the protective liberalism (Pro-liberalism) as an alternative to neoliberals for global economic system.

Theglobaleconomyhasbeenheavilyslowed-downduetotheCovid-19pandemic and protected unrest in the world. It has taught the world new dimensions and open edinnovative discourses. The structure in which the world has been growing economically needs to be modified. It started to establish new protocols in the field of public health, production systems and market; and develop new technologies accordingly. The crucial issue is the temporary policy framework does not maintain perfect balance on earth until and unless the economic policy is reformed. The experiences have confirmed that it is the product of a neoliberal economy that made things happen at once globally. In general, the severity of the Covid-19 pandemic outbreak was relatively high in countries such as Europe and the US, which favor and practice the liberal economy, while comparatively countries with less liberal (closed) economy such as Cuba, North Korea, Russian countries, African and South Asian countries are less affected. Disaster resilience seems to be comparatively effective in those countries. Since the outbreaks originated in China, a country with state capitalism, its economic openness is somewhat responsible for its origin. One bitter fact is that the human races or genes have evolved in course of human civilization and grown up with the herbivorous food around their shelter that made immense immune to disease. But neoliberals damaged the local food system and made the ubiquitous food that loses its immune system. As a result, whatever the disease, the disease can be worldwide. However, it is not the advocacy of state capitalism since it has so many bottlenecks. So, it has been essential to restructure the world economy that also favors restoring native food regime which also protects the environment, respects cultural diversity and rewards human pluralism along with equitable economic growth.

Neoliberalism came as the economic policy after the great depression of 1930 which is often associated with laissez-faire economy as conceptualized by Adam Smith back in 18th century that advocates ‘free’ market and anti-regulatory policies. The policy came after the Keynesian economics that evolved during the great depression which advocated for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. The capitalist crisis with its shrinking profit rates inspired the corporate elite to revive economic liberalism that made it ‘neo’ or new. The then British premier Margaret Thatcher became the pioneer of neoliberalism policies in the mid-1970s, a period when Keynesian policies still reigned in Britain and much of the rest of the world. The policy famous with ‘Thatcherism’ has been imposed by powerful financial institutions like the International Monetary Fund, the World Bank and the Inter-American Development Bank. Nevertheless, there has been already some structural modification on the policy with protectionism after the financial crisis of 2007-09. It is because neoliberalism could not efficiently balance the global economy rather it created the environment of the rich grows richer and the poor grow poorer around the world. So, the Marxists disparage the policy as the capitalists adopted the neoliberal approach because their class power had been diluted under Keynesianism and was threatened in the mid-1970s. They took neoliberalism to restore the class power because it creates condition for class formation. With these shortfalls, now, this pandemic has confessed the globe to reframe its economic policy in a new dimension.

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Economists projected that the global growth could be cut in half in 2020, to 1.5 percent from an earlier forecast of 3 percent due to the Corona Pandemic. It is projected that for any one percentage point slowdown of the global economy, the number of poor-and with it the number of food insecure people-would increase by 2 percent, that is, by 14 million people. In absolute terms, the greatest regional poverty impact was estimated to fall on Africa south of the Sahara, where 40-50 percent of the global poverty increase would be concentrated. In relative terms, the impact of a trade shock would affect Africa’s poor more than South Asia’s, given that Africa’s economics are, on average, more dependent on trade than those of South Asia, a large but relatively closed economy. The productivity shocks, in contrast, would have a bigger impact on poverty in South Asia than Africa, possibly because of the bigger adverse impact in the scenarios on non-agricultural sectors, which have a large weight in South Asian economics.

Major impacts came from workers unable to do their jobs, resulting in an average decline in labor productivity of 1.4 percent during 2020.Globally the human jobs had squeezed due to the digitalization the International Labor Organization (ILO) has estimated that the global market would lose 25 million more jobs due to this epidemic. Most countries, especially those whose economies are based on remittances, have to go through the outbreak of Dutch Disease. The devastating situation that would arise in countries like Nepal where there is no preparation for alternative measures of remittance would be even more risky. The demand for goods and services are already cut down and it will take time to revive. For example, Smartphone shipments in China were likely to fall 40 percent in the first quarter of 2020 compared with the same period last year. Most halted business sectors were small and medium enterprises in which a large number of people are employed.

The global epidemic also created opportunities for some countries. At first, it leads the world towards collective human values diverting from the higher materialistic individualism created through neoliberalism. On the other hand, the pandemic has further confirmed that the world has been a global village. Therefore, in the days ahead, rigid or orthodox nationalism may not work well. Concentration of development would be what we do for the globe, i.e., people and the planet. It also provides an opportunity for the least developed countries to regain their economic status through reframing their economic policy independently. These countries need to enable their capacity to make maximum use of the natural resources by properly managing the human resources, which will have very less with the developed countries as they have already crossed this stage. These countries have huge inventory of both the resources and the market. Optimum utilization of those factors can even change the balance of the world's economic and strategic power. The US will no longer be neither economically nor strategically the most powerful country within a few years. The situation in European countries will also decline. China has already shifted this balance. Similarly, Asian and African countries are moving towards taking the opportunity to ‘Take Off’ their economy. These countries will get rid of the existence of imperialism as an integral part of the global capitalist system since the interference from the powerful countries will be minimal as these countries will be stuck with their own domestic affairs and have the opportunity of autonomy, to more extent, in reorganizing economy and market in their own. So, there is the opportunity to overhaul the highly politicized, crony, gray and unproductive heavily structured economy into a new form of economy based on protectionism. This will lead to evolve new fundamental home-grown approach in the politico-economy that will replace the economic policy of neoliberalism which produced much ‘neo-liberal atrocities’. In any case, it will emphasize health, safety, dignity, equity and protection of the people and planet as visualized in protective liberalism. It will develop ‘human economics ‘which means the economy benefits all human beings equitably (not for the market, not for money), no one left behind. That can be the ‘Another World’ as coined by the World Social Forum. The growth, even if it ravages the planet and threatens human health. On this issue The Edelman Trust Barometer revealed in 2020 that “Capitalism as it exists today does more harm than good in the world” and the majority agreed that it is in question around the world. It justified that we need to build a new system that would balance economic mobility and human flourishing. The author developed the concept of ‘Protective Liberalism’ through research (2017) as a supplementary to libertarianism that would be the socio-economic policy for ‘Liberal Socialism’- a political approach.

How Does Protective Liberalism Reset the Global Economy?

Sinceneoliberalismcouldnotefficientlybalancetheglobaleconomyratheritcreatedtheenvironmentof the rich grow richer and the poor growing poorer around the world there has been already some structural modification on the policy with protectionism after the financial crisis of 2008-09. The social inequalities among the people are the consequence of a neo-liberal economy or capitalism which is a gain to egalitarianism, so the equality of opportunity is seen as desirable and necessary. Forthatawelfarestateneedsstrong system of solidarity and protection for its weaker section of the beneficiaries such as the vulnerable, the disadvantaged and the left-outs. The state policy of equitable economic mobility and social entrepreneurship through protective liberalism supports liberal socialism but sustainably restore the egalitarian society. It seems the free market is the ideal force of stimulus at which there is no or less state for market mechanism whereas protective liberalism is the practical solution within the frame of morere sponsible‘ welfarestate’ under the political thought of liberal socialism. Mickey Kaus has evolved a concept of ‘civic liberalism’ similar to protective liberalism. Likewise, Oskar Ryszard Lange evolved similar concept of Market socialism- a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy. It is a theoretical concept (model) of an economic system in which the means of production (capital) are publicly or collectively owned, and the allocation of resources follows the rules of the market (product-, labor-, capital markets). In this economic system, he includes ‘distribution according to relative needs’ which is very close to protective measures for the deprived ones. Likewise, Anthony Giddens (1998) blended two opposing ideologiesrationallyandbrought'theThirdWay'ofrenewing'SocialDemocracy'.The'thirdway'suggests that it is possible to combine social solidarity with a dynamic economy. To pursue this, we need a national government, less central government,but greater governance over local processes', as well as an opening out in the direction of the global community.

The COVID-19 pandemic has now strongly justified that the nation-state should be a responsible welfare state.Thewelfaresystemshouldberestructuredinaninnovativeway.Social innovation frequently occurs at the local level, and communities as a partoflargercivilsocietyhavetheirnativeskill, knowledge practices that can be base origin for innovation. Social welfare is the result from a change in economic and non-economic variables and a function of the utility (satisfaction)level of all individuals constituting the society. But any changes may benefit one section of the society and harm the other. For that, Caldor- Hicks Scitovskydevelopedcompensationprinciple.However, whatever caste, class or race of people then the state should satisfy them with reparation policy for their lost opportunities and dignity. Once the social choice, i.e. neoliberalism, is made all the individual comprising the society are compelled to accept it since social preference dominates individual preferences. It is not because they would benefit from it but because they do not have alternative social choice for the time being, no individual can disregard the social choice derived through a process.

The reparation policy as a protective measure should be undertaken to compensate the historical loss in welfare. Itshouldbearighteousphenomenoninademocratic‘welfarestate’.So, the sustained protective measures in the market mechanism not only compensate the loser harm due to the social choice but also equitably redistribute the income. It would bring the emancipator shift to that marginalized section of the society.

Therefore, while making a welfare policy, the state needs to analyze its losers and simultaneously establish compensation policy as the protective measure which is the main ingredient of protective liberalism. However, the question always arises on the process of making social choice or judging social welfare. Simple way of dealing it is the inclusionary representation policy as characterized by transformative democracy, the pillar of liberal socialism. It is beyond private or corporate capitalism and state capitalism at which the society or even a community will have command over the means of production ultimately for social wellbeing. So, it can be coined as the ‘social capitalism’ as well.

Marx opined that capitalists can exploit the labor class and extract surplus value from it because they have the ownership of non-human means of production. Amartya Sen in his entitlement approach marked that an entitlement eto papers on is determined by his original bundle of ownership and additional bundles acquired; and famine is seen through the lens of loss of such entitlement. These days, the equity of most of the corporate houses is concentrated in the hands of a selected few.

That large number of absent owners has no stake in the communities in which the companies operate. So, the collective ownership or social entitlement through the stake-holding that widens the proximity of redistribution of surplus value is the basis of the policy of protective liberalism. Likewise, the compensatory provisions within progressive taxation are other fiscal mechanisms to make it more equitable. Building an egalitarian society from bottom to top is the basic part of protective liberalism.

It assures both redistribution of income and increased social solidarity.It involves a balance between regulation and deregulation at national and sub-national levels;and a balance between the economic and the non-economic variables in the life of the society. Protecting the participation of the left-out people in governance itself provides an involvement with the system, safeguards the interest of the poor and marginalized communities and serves to stimulate the transformation.

Therefore, there should be ‘inclusive democracy’ or 'democratization of democracy' as the political foundation for the equitable development of a nation that is a transformative democracy. It makes the winner-takes-all competitions less attractive, thus limiting the in-egalitarian outcomes. Thus, protective liberalism to the left out people is neither anti-capitalism nor anti-socialism, rather it is the basic foundation for the transformative democracy which establishes the emancipator shift in the lives of the left-out people. It is the process of building human economics which concentrates on human well-being in an equitable manner rather than materialistic possession.

(Dr. Bk is a Professor of Economics and Academic Dean for Madhesh University, a visiting professor for Kathmandu University/Nepal and Akamai University/USA. He is the former Secretary for the Government of Nepal, Fulbright (Post-doctorate) Research Scholar at Brandeis

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