While the global economic crisis seems set to become worse than even the Great Depression of the 1930s, after the Wall Street Crash of 1929, there is a curious difference between now and then in the decade leading up to the outbreak of the Second World War. That’s because there is no real search for an alternative economic system. As Colin Crouch, Professor of Governance and Public Management at Warwick Business School, suggests in his new book, the death of neo-liberalism, or neo-conservatism, could have been expected in the wake of the economic disasters that began in 2008. But it hasn’t happened.
Usually, when an economic system fails, like laissez faire before the First World War or Keynesian economics in the oil crisis of the 1970s, politicians and economists move to an alternative. This hasn’t happened with neo-liberalism, although the current crisis is far worse than the stagflation which ended the golden glow of Keynesian economics
40 years ago and saw a shift to a new paradigm, the neo-liberalism known in this country as Thatcherism.
The dominant argument was one of deregulation and the apparent ability of the new theory to bring about full employment, growth and riches across a new global economy, with new players like China and India joining the dash for growth. As Francis Fukuyama famously noted, it was The End of History. Liberal capitalism had won; this was the new world order.
To be fair to Fukuyama, he stopped riding the neo-liberal bandwagon before it came off the rails in 2008. But few followed him, certainly not among the cohort of Nobel Prize-winning economists who failed to predict the imminent collapse of the world economy – and their theories. A few perceptive observers did – including, in this country, Vince Cable.
But the dominance of finance capitalism and big corporations remains, the people at the top reward themselves with the bonuses of success for delivering economic failure, and the rest of us suffer savage cuts to keep the super rich in the manner to which they have, sadly, become accustomed.
Colin Crouch notes that three major elements of modern life have come to an accommodation – the state (or, at least, the politicians); the market (or, more precisely, its ideologues); and the corporations. This, he argues, is “largely inevitable and not always malign”. As analysis, this is accurate, but as prescription it is deeply flawed.
It cannot be denied that, post-2008, failed corporations have become too big to be allowed to fail, while politicians see their role as maintaining the sleek and shiny fur of the fat cats. But while he is right to talk of “post democracy” this is malign and fundamentally unstable. A failing system which cannot be regulated or replaced will not survive. The question is whether, as in the 20th century, anti-democratic forces will emerge as democratic parties fail. The political elites are increasingly seen as useless or corrupt.
As Isaac Asimov said: “Sci-fi writers foresee the inevitable. Although problems and catastrophes may be inevitable, solutions are not.” The priority for us now is to seek those solutions.
